1/1/2015
guest How/will electricity retailing be disrupted?
Nice comparison.�
1/1/2015
guest Starting to see some more political fallout from the Petrobas mess...26 Billion in debt and low oil revenue is the new normal.
Brazil sees some of the largest antigovernment demonstrations in its history
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1/1/2015
guest Energy task force taking up solar, other hot-button issues
Another article on the "Task Force".�
1/1/2015
guest Interesting. 11 quarters of declining GDP. I guess the oil collapse could expose alot of political corruption and lead to regime changes.
Perhaps this would go better under the shorting oil thread, but it's good to see how these things are connected. Thanks.�
1/1/2015
guest Everybody is experiencing these early stages of the Information Age differently. In the US it's facilitated deeper corruption via disinformation, Brazil has it even worse, the Middle East is flipping between full on revolution and whip-saw repression.....some European nations are leveraging it to the advantage of the people. We'll all eventually end up more enlightened and it's positive effects should grow exponentially.�
1/1/2015
guest I thought about the short oil thread but decided it fit how I've been thinking about SolarCity lately. Political squabbles, utilities, NEM or macro market conditions have seemingly been moving the stock more than anything SolarCity has done either way. The Riverbend factory is coming online and Powerwalls are coming soon too in quantity so it's mostly watching these external forces effecting the stock lately. Happy to move it as well if anyone cares enough to do the paperwork.
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1/1/2015
guest No need to move it. I see your connection here. It is indeed frustrating to see SolarCity defined by the political struggle that surrounds it. We need to need to work through that.�
1/1/2015
guest Right. We are struggling to move from the Age of Oil to the Information Age. The later derives wealth and power from controlling extractive resources and the means of distribution of extractive resources.
Consider the music industry. It used to be about scouting talent. Locking that talent up in contracts, producing and distributing its recording. So music was an extracted resource embodied in physical media, a record, a royalty, a tee-shirt. But the Information Age totally upended that whole extracted resource business model. Artists no longer need to be mined and produced. Music is no longer controlled and distributed by physical media. So the music industry shows this this sort of transition. In the end music creators and their listeners are in much closer relation with much few economic opportunities for business to mediate the relationship.�
1/1/2015
guest I've stayed with SolarCity while the price went down (no options, just common stock).
I wanted to buy more in the recent lows, but held back.
What worries me somewhat is the CFO story. Brad Buss leaving so soon, then Tanguy taking the job.
Tanguy may have been a totally wonderful and competent COO, but when I have heard him speak on conference calls, my mind conjures up the image of a character who might not be best suited to the roll of CFO.
Any thoughts on the CFO position in general?�
1/1/2015
guest My sympathies to anyone taking that position. Particularly Tanguy because apparently he doesn't even get a pay hike for the dual role. What a pity.�
1/1/2015
guest Rooftop Solar Booms in Japan as Market Moves Beyond Rich Nations
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1/1/2015
guest I'm not as concerned about the CFO role as I am the role of managing institutional capital sourcing. Now that Radford Small has been bumped up to that role as EVP Global Capital Markets, I'm all good. CFO needs to be someone who can articulate on the quarterly calls and see the short attacks coming, that's it.�
1/1/2015
guest
I am a little reassured by what you say about Radford Small. But I have little to go on, other than a few good things happening with his name on them.
BTW, I share your concerns expressed a long way upthread about the public 'voice' of the company.
SolarCity needs a spokesperson who can deliver two or three hard punches all in one 30 second soundbite...that's the art of a politician, though, and not just an ordinary politician, but a really really artful one.�
1/1/2015
guest SCTY down 10% today solely on a potential SUNE bankruptcy? I guess that makes sense.....a little sense.�
1/1/2015
guest It's disgusting how those reporting about SpaceX and SolarCity don't seem to understand how bonds work.�
1/1/2015
guest They know exactly how bonds work, they just know how to manipulate stock valuations works too.�
1/1/2015
guest http://www.baltimoresun.com/business/bs-bz-exelon-pepco-approved-20160323-story.
D.C. regulators green-light Pepco-Exelon merger, creating largest utility in the nation
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1/1/2015
guest http://www.nytimes.com/2016/03/24/business/energy-environment/fight-to-keep-alternative-energy-local-stymies-an-industry.html?ref=energy-environment&_r=0
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1/1/2015
guest The drop in price of SCTY made me buy more shares. If it keeps dropping I may just feel compelled to buy alot more...as long as they are still a viable company I can't see a down side.�
1/1/2015
guest It's hard to imagine how SolarCity + Tesla Energy wouldn't remain a viable company with the vast amount of work that needs to be done globally... for the foreseeable future at least.
Venezuela Rations Electricity Amid Energy Crisis
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1/1/2015
guest The Venezuelan government is enormously dependent on oil revenue. So this situation does not surprise me.
I could see wealthy people in such an area loading up on Powerwalls and solar. This could allow even more political support for the government run utility to die. So it continues to get worse until most people have become off-grid capable. Not a pretty transition, but the end state could be much better than what they've got now.�
1/1/2015
guest No, that was not cherry picking, that was an easy to find and very relevant to the situation in Nevada.
Cherry picking, check out the solar price in New Mexico 3.5 cents per kilowatt hour
http://www.bizjournals.com/albuquerque/blog/morning-edition/2015/10/two-new-nm-solar-farms-states-biggest-line-up.html sure it may levelise up to 4 cents, but it is a realistic price 2016
again the question is
How much solar do you want?
the wholesale price of solar PV panels from China is about 50cents per watt
its not that hard to fill a sea container with 840 panels
ironically the wholesale price of a solar panel is about equal to Solarcitys marketing cost
free solar panels anybody? because solarcity basically has a price double due to marketing cost.�
1/1/2015
guest Except that rate payers in NV do not pay 3.5c/kWh for that electricity, do they?�
1/1/2015
guest The "Nevada situation" is fairly easy to analyze. Retail is 11� 24/7. Baseload wholesale is 3�, peak wholesale is 8-14�. (I think these are near correct)
Solar customers currently get net metering (11�/kWh) for energy pushed to the grid and NV Energy wants to shift that to the baseload rate of 3�/kWh. They also want a $39/month fee for solar customers.
Simple logic states that if the solar customer were not there to provide energy at peak, the utility would need to source wholesale energy at 8-14� from a peaker plant. So all these fees and lower payback rates are to fill the lost revenue to NV Energy, not to make the cost structure "more fair" to nonsolar customers. The fair and free-market way would be to shutter newly redundant peaker plants, not build even more at $900M a piece.
Residential solar is being driven out of the state to protect the inefficient but profitable status quo while NV Energy simulraneously builds out utility solar to keep all production behind the meter. It's clear as day.�
1/1/2015
guest Solar competes at the retail level. Oh wait, utilities can't compete at that level............. Regulatory Capture.
What is 'Regulatory Capture '
Regulatory capture is a theory associated with George Stigler, a Nobel laureate economist. It is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.
Read more: Regulatory Capture Definition | Investopedia Regulatory Capture Definition | Investopedia
Follow us: Investopedia on Facebook�
1/1/2015
guest Tesla, Switch backing effort to end NV Energy monopoly
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1/1/2015
guest The Energy Modernization Act of 2015 which includes the King-Reid amendment for "Net Metering", also includes an appropriation for the Flint Michigan water crisis. It is being held up by Utah Senator Mike Lee.
Is this not definitive "Regulatory Capture".
Michigan's lament: As Utah senator holds up aid package, Flint suffers
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1/1/2015
guest Sent SolarCity Investor Relations an email looking for clarification around customer acquisition costs. They responded by putting me on the sales list and cold calling me twice on Easter Sunday. Not feeling great about the direction and cost of the SCTY acquisition process.�
1/1/2015
guest China Is on an Epic Solar Power Binge
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1/1/2015
guest Ouch. When did you email them? If during the holiday, maybe some AI intern was on call. Otherwise, not a very good sign.�
1/1/2015
guest Just a guess. If SunEdison goes bankrupt, SolarCity will be able to buy pieces of its portfolio for pennies on the dollar. SolarCity has plenty of cash and wealthy backers.�
1/1/2015
guest Wait, what? Any serious hints SUNE might go belly-up? What happened?
I haven't been watching since I divested about a year ago or whatever. Glad I did, now!�
1/1/2015
guest A potential SUNE bankruptcy was what tanked SCTY and others 10% the other day. $14B in debt or something like that?�
1/1/2015
guest Vivent is very close to a MLM scheme that only happens to be involved in the Solar sector. Basically they have a gigantic mailing list and existing customer base and try to bundle together /sell every conceivable service related to the home. However, if you check out the BBB website, it's clear they use loads of subcontractors and questionable contracts to acquire and hold onto customers. Also, there
Basically everything that has to do with the home. Home security, TV, Internet, and Energy,
Sunedison and Terraform buying Vivent Solar was probably not a good idea, unless the objective was to get them out of the market so Sunedison could be acquired.
Also SunEdison is an old company with a lot of problems. This article does an okay job explaining certain things. (See link for the rest of the article)
Understanding SunEdison's Business Model - Market Realist
Disclaimer : I understand very little about how these types of maneuvers work, or if this is what happened, but it sounds plausible.�
1/1/2015
guest Thanks! Someone posted a link to powur the other day. Impressive sales videos - for what smelled to me like a MLM scheme based on climbing over subordinate people making a few hundred bucks for sales leads to SolarCity. Higher bonuses for more underlings and leads. Holiday Magic all polished up!�
1/1/2015
guest VSLR acquired most of its customers from its existing customer base and door to door sales. VSLR doesn't have much if any technology advantage nor does it appear to have a credible accounting strategy.
SolarCity is a vertically integrated technology company, that relies on word of mouth advertising, along with sales people to grow. SolarCity has partnered with Tesla Motors, SpaceX, Nest (Google), Home Depot, the DOD, Walmart and many others. Additionally, SolarCity has acquired companies with real value. The acquisitions were conditioned on time, quality, and other factors. Also, SolarCity has access to an almost unlimited capital due to Elon Musk, Bank of America, Morgan Stanley, Goldman Sachs, and Google, not to mention Sergei Brin and Larry Page.�
1/1/2015
guest Nevada judge rules to disqualify solar industry�s ballot measure
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1/1/2015
guest so we all need to be on the look-out for that list for us to sign.�
1/1/2015
guest There's no shortcut to sustainable success in the PPA world. Operations like this want to have it both ways, outsource all the work effort AND maintain top notch quality. The model itself breeds horrible service, there's no way around it.
You MUST keep everything in-house, that's why SCTY's lead in the industry will be so valuable in 2-4 years when it's near scale nationwide. You can't walk into an industry and show a record of 10 years of unwavering service, you have to earn those years and it sounds like everyone other than SCTY is going to get shaken out this year.
Solar will obviously continue to grow.
Cost will continue to drop.
The PPA model will continue to appeal to 40-60% of solar customers.
SCTY may very well be the only top quality nationwide PPA option soon.
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1/1/2015
guest This is the right time to do it. The monopoly is no longer in the best interest of the people.�
1/1/2015
guest Daniel Burrus - Techno Trends
Perovskites???�
1/1/2015
guest Had read something on perovskites so there is likely some such thing. Can't remember what. However, Burrus'es link to ecole polytechnique federal de lausanne was a 404 - verry 1337 indeed.�
1/1/2015
guest Rooftop solar could provide nearly half of US electricity demand
Here's some good news for rooftop solar. NREL estimates that rooftop solar can provide 40% of electricity consumed in the US. This was based on using 16% average panel efficiency. If 20% efficiency is assumed this goes up to 50% of consumption. SolarCity, SunPower and Panasonic are now building panels at about 22%. So perhaps this gets up to 55% potential. Also canopies and ground mount are ignored in this study.
So it looks like SolarCity has an addressable market of about half of all electricity consumed. That is enormous.�
1/1/2015
guest Not really. Many people choose to buy direct. We don't actually know the addressable market. We can not really base the split between buying vs PPAs based on the rate of current installs because we don't know how much sales effort is being expended on either side.
From all indications it appears like that SC found a niche market where people don't have pay much taxes and thus can not make use of tax-credits fully. I didn't run the numbers but it would be interesting to find out demographics on that.�
1/1/2015
guest In other news, grid based solar is growing like a crop.
Harvesting Sunshine More Lucrative Than Crops at Some U.S. Farms
Eventually we will have so much solar that it will be very over-flooded. Batteries will be desperately needed for growth and the ultimate growth constraint will be the amount of storage. Cost of batteries needs to be factored into any parity analysis with fossil fuels.�
1/1/2015
guest Navy goes solar in Saratoga County
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1/1/2015
guest The key word here is "addressable." They are addressing the whole rooftop and canopy market; how successful they are in capturing market share is a separate matter. It's a big pie whatever their slice.�
1/1/2015
guest Considering the 740+ credit score demographic of SolarCity's customer base to this point, I would say that conclusion is nearly 180 degrees incorrect. Half of the retired customers(which could be a substantial amount) would perhaps look at it from that perspective, but the vast majority of customers to date have incomes well above average.
Not having to deal with the tax credit likely has brought in more customers than the need to bypass it.�
1/1/2015
guest And it's not addressable production percentage that counts, it's addressable current dollars spent on electricity. Clearly residential/commercial is the sweet spot for that, and those just happen to be the sectors that didn't have the option to self produce.....until now. Targeting the industrial customer is like targeting utility scale solar installs, there's never going to be any margin.�
1/1/2015
guest Not sure I agree that SC can't successfully compete on the purchase front. Imho, at least here in California, I think they have the market power to successfully compete in any part of the rooftop market (PPA, purchase, financed, etc.).
Thought I'd weigh in on this point with my own anecdote.
Both my brother and sister have installed solar on their homes in the last 2 years (they are basically professional middle class and can use the tax credit, but live paycheck to paycheck). Both used "cheaper" installers.
I have meaningfully greater resources than either my brother or sister and have complete flexibility in making a choice of installer for my own install later this year.
- My sister opted for a PPA. Ultimately it worked out, but her installation was a nightmare. It took months of delays and non-communication from the installer. She had the panels installed for 4 months before anything was turned on. Start to finish it took almost a year.
- My brother opted for a PPA at first. Installer took his deposit and basically never performed the work -- although they did upsell my brother on overpriced energy efficiency upgrades. My brother ultimately got his deposit back but it took months of wrangling. My brother then managed to successfully find another installer and get the job done on a purchased basis (albeit financed).
Much like with any contractor I hire, I will not choose the cheapest installer -- particularly for something being installed in my roof. Like most homeowners, I made too many mistakes earlier in life with low-bid providers doing shoddy work, or even with high quality installers failing on communication.
On solar directly, I've heard way too many anecdotes -- and not just from my family members -- for it to ever be worth my time and aggravation to save even $1.50/watt. I'll choose the dominant provider in my area -- the one that can deal with my utility, my city and install a clean technological product in a timely professional manner.
Heck, I still haven't ruled out using a PPA even though I could purchase outright.
SC might not be that provider, but I can guarantee that my decision will not be based on price. If you were to ask my brother or sister to choose again, they wouldn't be choosing based on price either.
And as an aside, it's always mystified me the stigma put on choosing PPA over financing/purchasing. Much like with car leasing versus buying, many rational people would choose a PPA over purchase. It could be because of psychological comfort about obsolete technology or it could also be that your own cost-of-money is sufficiently higher than what a PPA is charging you (e.g., you have better investment opportunities) or it could be for myriad other reasons.�
1/1/2015
guest Come on people! Why has this video only been viewed 24 times?
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1/1/2015
guest Because it is over an hour long and there is no statement as to why one should see it?�
1/1/2015
guest Utah guv signs bills on power regulation, porn and lands lawsuit
To be fair, they also signed a bill declaring pornography as a public health crisis....so obviously they have it dialed in.�
1/1/2015
guest thanks for sharing! Great presentation and rebuttal from Lyndon.�
1/1/2015
guest Ohio electric bills may increase: PUCO to vote on deal to help FirstEnergy keep two high-cost plants running
Modi's Plan to Clean Up World's Worst Air Resisted by Indian Power Generators
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1/1/2015
guest I'm so freakin tired of this resistance. It.is.going.to.happen. I want to pull out my white glove and give them each a gentlemen's slap in the face.�
1/1/2015
guest How is the SUNE debacle not dragging down SCTY? I was expecting a nice dip in options pricing and it keeps drifting upward.�
1/1/2015
guest �
1/1/2015
guest Maybe all this new interest in Elon and Tesla is shining on some SCTY panels today?�
1/1/2015
guest The same analogy can be made to say that McDonalds has enormous potential to deliver all food to all Americans who are hungry. It's a stretch to link one particular company to the entirety of the need of the population. Especially when economics and supply/demand/competition are involved.�
1/1/2015
guest I think the more apt analogy would be that restaurants can serve half the food consumed. It's not that SolarCity can realize a market share of half the US electricity consumed, but that all rooftop solar has that potential. The critical issue here is that the protected niche of traditional utilities is shrinking. The utilities are safe from rooftop competion for about 60% of the market with solar at 15% efficiency. But this shrinks to only 20% safe with solar at 30% efficiency. In 20 to 30 years, 30% efficiency may be a possibility. This combined with batteries and other forms of distributed generation suggests that utilities may simply not be needed in 30 years. They will have to compete on service and price for any market share they are to retain. Remember that the retail cost of transmission and distribution is about 7c/kWh. As solar and batteries approach that price in the coming decades, the competitive landscape will change enormously. Electric utilities could go the way of landline telephones.�
1/1/2015
guest Given that this is not reported here
Outten & Golden LLP: SolarCity Corp. Accused of Failing to Pay Overtime to Installers�
1/1/2015
guest Saw and talked to a guy who works for and was wearing a SolarCity shirt today in line at the Dallas gallery. This was great exposure for the company.�
1/1/2015
guest Here I gotta disagree with you, even with 100% net generation with distributed solar the need to operate the transmission and distribution is minimally impacted, and the need for coincident peak power generation still exists (but moved and reduced) and the need for a billing and customer 'service' entity is unchanged.
in my country SA is approaching 100% daytime energy from renewable (mostly solar) at around 2023 Rooftop solar to cut total grid demand to zero in South Australia but they will still need those powerlines
in my country Tasmania exported too much zero emission energy due to the carbon tax and is now rushing to run on diesel because their dams are too low. Labor, Greens call for Senate inquiry into energy crisis
the cost of customer 'service' transmission and distribution is high and generally fixed, going 100% net solar does does materially impact those costs. cutting the line to the grid eliminates those costs.�
1/1/2015
guest American Electric Power, FirstEnergy Get Ohio Approval to Shift Some Cost Burdens to Customers
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1/1/2015
guest I'm talking about the economic opportunity decades out when batteries are cheap and abundant. At the present moment, Australia is in sore need for batteries. IIRC, Tasmania lost its transmission to the mainland and is in a crisis situation. These situations will radically change as storage is added to the mix.�
1/1/2015
guest I expect that grids will be retained; they're far too useful in cities.
However, it's already uneconomic for extreme rural areas to be on the grid. Think of the options:
(1) Lots of batteries and solar panels. There's plenty of space for them, the land is cheap....
(2) Big copper distribution wires running for hundreds of miles just to reach you. Poles. Guys maintaining the poles and wires. Trimming trees. Etc. For a few guys living in the middle of nowhere. They're highly subsidized right now.
I expect the rural areas to go off the grid fast. A few utilities in Australia have *already figured this out* and are paying the remote rural customers to install batteries so they can take them off the grid.
Now, here's the thing: with the rural areas removed from the grid, *the cost to operate and maintain the grid drops*. It may become quite competitive to maintain it in the big cities.�
1/1/2015
guest We need distributed batteries - such as 500 kWh units sitting at the head of a cul-de-sac. Times thousands. Fill them up at night using base-load plants, top them off during the day if the homes have solar on them. Net-meter excess back to the attached grid. Perhaps allow homes to back-feed into the batteries should a grid-down event happen. A cul-de-sac of 100 homes, with 20-30 of them housing solar, could aggregately recharge a 500kWh block of batteries if they provide grid-up signaling and re-charge limiters should voltage hit max. I don't think it is nearly as efficient to install batteries in each and every home. Community battery is where it will be at down the road.
Same for a business building that has high demand (steel mill, for instance). I was just at a steel mill in Iowa recently and their powerline connection is enormous and it's a small mill. They only need the full power primarily when starting up the furnaces. The rest of the time, their demand is limited. I don't think steel mills will use batteries - but their furnaces burning during peak daytime load events along with high levels of AC and other business functions is where some of the problems lie.
When I shopped for my Solar PV array in 2009-2012 (installed Dec. 2012) -- Installers were telling me we had to reduce need for peaker plants. Those plants actually are rarely used. Baseload plants have moved from coal to Nat Gas during this time and their efficiency in both labor (cost to run) and fuel (NG is cheap now) makes them more interesting as a near-term power supply. But NG is only 25% less CO2 output than a coal plant for each MWh produced. Carnegie Mellon says NG produces 600 kg of CO2 per MWh while coal 800 kg.
What we also see - with the recent Tesla Model 3 reveal - is that 100,000's of new EVs will be recharging at night (primarily). Solar PV alone isn't going to be a solution there - wind farms are. Wind in Texas at night allows some people to pay negative rates on night-time power demand. We need to see more homeowners considering local wind power in the Dakotas and other wind-zones. Wind is just as viable of a product to offer customers.
I am actually surprised that Solar City isn't in the homestead wind installation business. It is just as lucrative as the now lower-margin Solar array business.�
1/1/2015
guest Nearly 600k shares in the first 12 minutes of trading. Not too shabby.�
1/1/2015
guest Almost all power delivery is done using aluminum wires. And we know the price of aluminum is down well from it's highs. (so is copper too). I live near a whole bunch of people who are not on the grid. They do fine. They're called The Amish. A few use a small wind turbine to recharge batteries. A few have a couple solar panels to recharge batteries. The main problem is the enormous power needs of the "modern electrical family". 2500 sq ft homes using up to 2000 or more kWh per month. Inground pools dot the landscape. Pumped and kept warm for the few times we use them. The problem is if we lived smaller and lighter - we could actually live in self-contained, off-grid homes. Why not have a community pool rather than everyone having their own?
The power grid is the largest, most well maintained and most reliable "machine" on the planet. I just don't see all the negativity of the grid. One day it is "coal is bad", the next is "grid maintenance is expensive". But when you make everyone's home its own power station, you end up with so many points of failure that need annual maintenance, 1-2% annual production decrease due to loss of efficiency of solar PV modules and battery degradation. The issue is "just who is right?" It is some combination of all things. To make every home self-contained, off-grid - the cost is easily 4-5 times that of the grid itself. Even with sub-$100/kwh batteries. The batteries need to be replaced every 10-15 years after 3600 cycles if they use more than 75% of the state of charge (I'm talking Li-Ion still, not LA). If I was building a rural home today, I would first make it very energy efficient. I would take into account all conservation measures possible (ie. no inground pool for one). I would put up enough Solar PV to account for double my EV miles expected. And then I probably would still want to be connected to the grid because the kWh costs are still quite cheap versus the alternatives. Now, if I was living in a rural place in India or Africa where power outages are daily - sure, off-grid I would go. Just like many middle-class and upward homes in India have backup battery systems now.
I really think community and campus battery systems would be a good thing. If me and my neighbors could share a battery system and even tie-back solar pv production into recharging those batteries and the batteries were grid-regulated to act as a "little mini peaker plant" then I think we will be getting somewhere. In America, we really don't like sharing because we fear "someone else may get the better of me in the deal". But if the grid providers could offer cost of scale deployment of batteries in a sensible manner that also allows for battery-backup should a grid failure occur - then it's far more equitable.�
1/1/2015
guest I could only find this blurb in the free Politico Morning Energy section. Isn't the Senate Energy omnibus supposed to start up again this week?
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1/1/2015
guest PJM's market management is what should make for a fair market. Locking in old plants at higher than market rates isn't really fair in such conditions. Let the market decide what power prices should be. The end result with higher generation prices - higher end-user customer prices. It hurts more to help the few.�
1/1/2015
guest Someone needs to be the adult and decide where the cutoff will be for new plant construction. I'm perfectly willing to give these utilities some slack since they've put so much money into plants that the market asked them to build. However, if I lived in Nevada should I not be livid that I am going to end up paying for this new NV Energy peaker plant that will be obsolete on day 1?
Someone needs to come up with the rules for transition. I'd say Congress, but that is an utterly laughable concept. Hopefully DoE is working on the rules that will bring a bit more order.�
1/1/2015
guest bonaire:
In Australia a remote community just had its grid connection destroyed in a wildfire. The utility decided it was cheaper to buy a bunch of batteries and solar panels and build them a "microgrid" than to restore the power lines.
This is what I'm talking about. The big electric grid is more suited to suburban and urban density. The rural one-house-per-mile (or less) areas are a huge drain on grid maintenance costs and are heavily subsidized. There's a reason the US had urban electrification in the 19th century, but didn't have rural electrification until it was subsidized by FDR as part of the New Deal.
But these same rural areas also have gobs of space to put the solar panels and batteries, and enough space to locate the solar panels optimally. Often they have enough space for windmills, too.
I think the remote rural areas will be taken off the grid, because it's cheaper for them to be off-grid. And I think that will bring the grid "distribution and transmission" costs *down* for the rest of us, making the grid a better deal.
All this has nothing to do with the utilities with antiquated business models who are trying to subsidize obsolete fossil fuel plants, who are just trying to get away with something. I live in NY where we already separated generation from distribution, successfully, and our utility is behaving itself.�
1/1/2015
guest neroden - up in Rochester NY, some startups are working on trying to find the next gen Li-S batteries and other advances. The goal is double today's density (double what Tesla cars have on a per-kg basis). I also think Li-S negates the venting with flame issue. Both positives. Give us 3000-cycle Li-S batteries at double today's density and then we'll see things take-off for grid-operators and for EVs. What we really need are ways to hybridize the trucking industry. We can do electric local delivery trucks (FedEx, UPS) but we have a hard time with the big-rigs.
Land ownership. In the outback of Australia, it may be easy to install a MW or many MW of solar and wind in one spot to take a town offgrid. But in the USA where land ownership is a costly thing, you almost have to subcontract with farmers to install something to serve a small region with some of their land. Right now, the USA has tons of subcontracted "land" where a cell tower is installed on private property and the owner gets paid for that service. Will power companies offer land owners such a scenario? It would seem wind turbines and batteries would work out better for farmers than solar arrays and batteries. You can still farm the land under and near a wind turbine. Once the 1MW takes up the 4-5 acres, it's hard to use the land effectively.
But before we get too crazy with renewables, I would like to see Thorium reactors be attempted for viability and even deployed. There is hope that thorium nuclear reactors would be a great solution to older heavy-water nuclear plants. Great for base load and very green. Nuclear is quite green. Only problem is the radiation.
Thorium Power Is the Safer Future of Nuclear Energy
My room mate in college was from Ithaca. Nice town. Back in the day, I remember bike racing around Cayuga lake.�
1/1/2015
guest Maui Now: HECO Proposes Modernizing Plan for Hawai�i�s Grids
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1/1/2015
guest SunEdison "preparing to file for bankruptcy". Maybe a nice SCTY buying opportunity coming up?
I know they're nowhere near the same model, you know they're nowhere near the same model, but this MUST have some downward effect considering it doesn't seem to take much these days.�
1/1/2015
guest So, timing can be critical. Will I have time to take a little profit on TSLA to put into SCTY before the solar price contagion sets in? That might be nice, in re-diversifying a little.�
1/1/2015
guest Same thoughts I had for a while now, that would be the best case scenario. I don't expect much good from next SCTY ER so that could provide another opportunity.�
1/1/2015
guest the tweet is a year old�
1/1/2015
guest My bad�
1/1/2015
guest My only concern is that the guidance for 1Q was set obscenely low. Certainly odds are we're in for another ER downturn, but one these quarters it's gonna shoot up.
I'm gonna give it a few weeks and reevaluate the odds before earnings.�
1/1/2015
guest ...or is it?
Rural land remains extremely cheap. In the great deserts of California, Utah, Arizona, and New Mexico, and the ranchland of Texas, Oklahoma, Colorado, and so forth, it's *extremely* cheap. Even in the fertile Great Plans and Northeastern Forest, land is quite cheap. We don't have any truly remote communities in NY, and yet the acreage is still cheap. People building solar farms in upstate NY are leasing the land from farmers and the farmers are very happy for the income; I'm hoping it was unfarmed, fallow, marginal-for-agriculture land, but sadly I'm not actually sure.
Since we don't have any truly remote communities in NY I expect the whole state will stay on the grid. But I look at places like the Navajo Reservation, and I think "The grid is not right for this; they need to be off-grid".�
1/1/2015
guest While I don't know those specifics, Australia is about 95% connected to the grid, 4% connected to private commercial off grid, 1% connected to residential off grid. Off the 5% not connected to the grid, they all are paying big $$$$ for fuel for electricity, and have/were the natural base from where Australia's solar PV aptitude came from. We also have legion of small micogrids (diesel) which are too far away from transmission for connection. There is indeed a a lot of subsidy in our northern states to keep these communities lit up. Think WA,NT,Qld�
1/1/2015
guest rural land is valued on its productivity, if there is a lack of water, the land is cheap
if it is arid or semi arid, the land is cheap, perhaps free is some value add will occur
desert dwellers will understand it instinctively, but it is counter intuitive for people used to paying for land.�
1/1/2015
guest SunEdison Plans To File For Bankruptcy | Fox Business
More than 750 Arizona rooftop solar customers at risk as bankruptcy looms for Missouri-based SunEdison Inc.
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1/1/2015
guest I would have thought all that SunEdison bankruptcy news would tank all the solars today, but I woke up to find SCTY is up 90 cents? I guess oil and macro are more important. I've given up trying to predict what this stock will do near term.�
1/1/2015
guest Maybe it's up today based off the overwhelming Model 3 reservations as potential client pool for a minimum of installing charging if not panels or smart home systems sales leads? Shrug.�
1/1/2015
guest SCTY monetized $40M worth of SRECs. Wondering if anyone knows the structure of these deals and more specifically if it leaves SCTY with the upside if they balloon in value.
PA SRECs for instance are worthless today because the previous governor purposely sabotaged them by allowing out of state SRECs to count in PA, but not vice versa. If the new admin somehow locks that down and can also get targets raised, that could lead to massive increases in SREC value. So will SCTY retain that upside or is it considered to be part of the value within whatever instrument monetized them?
If state governors find the SREC program to be a useful lever in countering anti-solar moves by state legislatures, isn't SCTY sitting pretty on 20% of all SRECs?�
1/1/2015
guest Solar farm developers target New York with lease offers
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1/1/2015
guest This came out today:
Stifel�s Sven Eenmaa maintained a Buy rating for the company, while reducing the price target from $65 to $56. Investor interest seems to be centered on financing.
�With several term sheets received and being negotiated, the company appears to be making progress on the monetization front with the aim to deliver better IRRs than SolarCity�s current stock valuation implies,� analyst Sven Eenmaa wrote.
He expressed confidence regarding the probability of successful transactions over the next six to nine months, adding that management�s continued focus on reaching the previously guided cash flow positive in 4Q16 was encouraging.
�Cash and liquidity available to SolarCity as of 4Q15, pro forma for recent financings and including tax equity, amounted to $1.9bn+ per our calculations, which to us implies no immediate funding need and sufficient time to negotiate,� the analyst commented.
Eenmaa pointed out, however, that while the stock�s risk/reward over a 12-month horizon appeared favorable, �we view the transaction timing here as not without risks, which could have implications on 2016 installation volumes.�
Read more: ENERGY TRANSFER PARTNERS (NYSE:ETP), (SCTY) - Stifel Cuts SolarCity Target, Downgrades Energy Transfer Partners: Here's Why�
1/1/2015
guest We're still in "Existential Land", with these folks pricing SCTY as if there's a risk they go under. Fair enough, there are certainly going to be weaker players "shaken out" in this sector. Not sure how much longer analysts can look at this company and see anything other than the PPA winner. I guess you also need them to realize that PPA itself isn't going away either.
$2.4B for this company is a joke, but they're gonna need to show 2Q installs and costs on pace for 2016 goals to quell the solar & PPA jitters. That should be easy enough. I mean, 1Q install guidance was set at like 20% yoy so............�
1/1/2015
guest Plus maybe they can take over with first class servicing some of SunEdison former customers, or buy assets for pennies on the dollar. Obviously...it's not as lucrative as running a failing fossil fuel utility with stranded assets where the regulators will guarantee your profitability by shifting the costs to the retail customers *cough*, Ohio.
Seems weird to me too.�
1/1/2015
guest Was thinking that today. What kind of leverage dies SCTY have as the best positioned option to maintain these SUNE contracts? Should be some really nice PR that's worth going after.�
1/1/2015
guest Convince me that PPA isn't going away. Every time I read a head-to-head price comparison, it tells me people are better off (a) buying outright, which is obvious, no interest costs, and (b) getting a home improvement loan, which is the thing which threatens to kill PPAs.�
1/1/2015
guest Don't underestimate consumer's love for simple solutions. I have a buddy who lives in San Diego, makes good money and is smart as all get out. He just signed a PPA contract with Solar City. Before that he asked me if it's an Ok deal (I had to point him the elevator clause in the contract, he didn't read in enough detail), and I told him to do the math on the outright purchase. He just doesn't want to deal with it and also didn't want to increase his debt ratio, so PPA it is. He gets his energy cheaper than from utility and everything else is taken care of. He's happy and doesn't care about price comparisons.�
1/1/2015
guest Do you think that leases for cars or homes are going away? Outright ownership of these assets are often financially beneficial in the same way.Longterm I think the specific threat to solar leasing is simply that solar system will be subsumed under homefinancing, i.e., when you buy or lease a home with solar included, there is no needs to break solar out as a separate asset with separate financing. But even then when one has to upgrade or replace solar assets, separate financing may again come into play.
Another angle on this is that utilities and industrials have used PPAs for quite a long time. I've heard no one suggest that one day utilities will abandon buying PPAs because it is somehow inferior financing to alternatives. If PPAs are good for utilities and commercial entities, why not residential?�
1/1/2015
guest I will predict that when solar PV generation ramps up to high capacity, electricity will be much less expensive in the daytime vs. at night. Especially during the summer. This will really put the pressure on to install workplace charging, so workers can recharge during the day, after they arrive at work. This seems like a more elegant solution to me for reducing the CO2 required for EV charging.
GSP�
1/1/2015
guest GSP - I would love to see workplaces install both Solar PV and car-charging stations. Typically, they install the Solar but lack the charging. Reminds me of a brewery near me. Made a big stink about installing Solar PV but kept the whole restaurant setup with 60W incandescent bulbs that they could dim.
In the future you will commute-in, plug-in, get your re-charge while the sun shines and not tap into the peak demand because you are fully charged before 3pm where peak demand begins. Then when you arrive home you can either set charge for the early morning hours (low TOU rate) or just re-charge the next day at work again when solar is at its peak. That is the future of commuting.
There are just so few EVs on the road nationally that this scenario is decades away "large-scale".
Also, for jhm above - car leases are one thing but PPA is another. car leases are 3-year (sometimes 2) commitments. If Solar PV drops enough per Watt that it makes more sense to install for cash or HELOC over PPA any day. With 300W and denser modules and if costs of scale reduce module and racking costs further, anyone getting a roof replacement will think about adding modules at the same time. Six 300W modules would be enough to offset one EV bought into a family. Most homes can offset their entire electricity bill with more modules. My own system uses 255W modules and the same manufacturer makes 310W modules today of the same size. I could have done the system for $7000-8000 less today than back in late 2012. PPA can be misleading if it includes annual price adjustments to raise rates based on an assumed utility-price increase.�
1/1/2015
guest Cost of stopping new coal and gas projects in freefall, costings reveal
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1/1/2015
guest You'll just have to figure that one out for yourself. From my perspective....I'm a childless solar nut with great credit who built my own deck and I'm still actually considering SCTY instead of a straight install. I want access to SCTY's services down the line and like the idea of being able to seamlessly jump from solar to battery to microgrid all while staying right at the cusp of the tech curve at no cost..
I also kind of like the idea of doing it myself and then maybe talking microgrid with SCTY in 6-10 years. I'm personally on the fence and will likely buy, but I'm 38 and I don't see the majority of my 2+ child friends ignoring the simpler route with a premium. The trend is clearly toward "____ as a service" and that's just what SCTY provides. Everyone wants to "go solar", but is turned off by the hassle. Sadly they care, but not THAT much.�
1/1/2015
guest This was the free blurb from the Morning Energy page. It sounds to me like the utility is at least trying to adapt, in California anyway, and officially recognizes the benefits of distributed generation to the utility itself. I couldn't find any other news on this proposal.
�
1/1/2015
guest Shorts covering today I presume? Maybe they've decided to flee their positions in TSLA and SCTY en masse.�
1/1/2015
guest Bonaire, this thread has spent at least 100 pages debating PPA. It's a pet issue of SolarCity bears. I've lost interest in debating it further. If you see some way for SolarCity to grow faster without offering PPAs to their customers, I'd be interested.�
1/1/2015
guest Utilities are actually prohibited from owning generation where I live. PPAs are their only option. Industrial and commercial operators who have the cash or decent financing rates usually do take the cheaper option of owning outright.�
1/1/2015
guest Sure there are occasionally regulatory reason, as well as tax, balance sheet and other strategic reasons for PPAs. PPAs are a form of off take agreements widely used in many industries. For example, one could argue that airlines would be better off owning oil refiners directly for the fuel they need. And by extension they should own the oil pipe lines and oil wells as well. Yet many airlines are content to have forward purchase agreement with a fuel supplier. Off take agreements of all sort are important strategic options. And this is no less true when the product is electricity. Sophisticated power buyers know how to work through all the details to arrive at the best choice for them.�
1/1/2015
guest Mexico solar capacity to surge 521% this year, says GTM Research
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1/1/2015
guest Does anyone know what's driving this awesome upward SCTY march? TSLA halo effect? Gradual acceptance of importance of solar (despite some pending solar bankruptcies)? Shorts slowly getting out? All my dreams finally coming true?�
1/1/2015
guest Probably all those things.
Loosening of the corporate bond market.
Far less worry of a global or US recession.
Jobs reports.
The election primaries.
I still think we drift up toward that semi-pessimistic $50 level over this month then do the 20% tank after earnings in May. That being said, I've timed this wrong so many times, my guesses should probably be taken as the exact opposite of eventual reality.
If Nevada resolves itself either locally or federally, that could be the big symbolic trigger. Perhaps that's happening in the background as part of that Senate energy bill seemed to have fizzled.
May have to bite the bullet and buy the final batch of 2018 options, but will wait til some folks hopefully take profit and we drift back down.�
1/1/2015
guest I think it's also becoming clear to many investors that the Tesla Gigafactory is now on hyper expansion planning and not a fairy tale. No matter what the utility monopoly tries to impose, solar + Powerwall can compete directly with the increasing retail grid prices. Plus the Riverbend payments are back on track and the Senate is debating a solar friendly metering policy, supposedly, I think.
Lots of blue sky perhaps?�
1/1/2015
guest Looks like pressure is mounting from all sides to get the Senate energy bill passed, so perhaps that's a reason for the upswing. Two idiots from Utah and Florida(shocking) are holding the whole thing from getting a vote. Pretty much a walk if it can just get to a vote.
Flint, energy bill talks stall in Senate
It is my understanding that any changes to net metering in any state would be required to account for the benefits of solar to all ratepayers when attempting to revise net metering rates. Essentially, they'd need to use realistic math and accounting rather than just look at costs. Since solar is going to be more efficient(cheaper) in almost any scenario, this means net metering will be very hard to challenge. Also somewhat locks in grandfathering of net metering rates for existing solar customers. You can imagine how huge this all would be for SCTY.�
1/1/2015
guest Nice update and run down on the SC Buffalo factory
A Gigafactory Is Rising in Buffalo, And It May Change the Solar Energy Industry�
1/1/2015
guest SolarCity Closes $150 Million Non-Recourse Financing Facility with Credit Suisse for Commercial Solar and Battery Storage
New financing information.�
1/1/2015
guest I like how they included commercials for their hardware partners in the release. They're learning.
No cost info though? I assume that means it's ugly.�
1/1/2015
guest Ex FERC chair joins SCTY as Chief Policy Officer. I like the sound of this.�
1/1/2015
guest $188M in the second tax equity deal. Money is flowing, we just need some federal protection for net metering.�
1/1/2015
guest Warmed up to an idea of picking up some OTM LEAPs.. Alas, J17's are too close (or put other way, not cheap enough) and J18's too expensive.�
1/1/2015
guest Wellignhoff is tremendous additional to Solarcity. Perfect background in legislative & regulatory matters, with the right mindset regarding electric vehicles and renewable energy.�
1/1/2015
guest Holy frijoles!�
1/1/2015
guest Elon Musk on Twitter
SolarCity is getting some free tie-in publicity from Tesla. Riding the Model 3 wave could be a good thing for SolarCity. Market, yes, but also policy. Consider net metering for a family with two EVs. They need about 20 kWh extra each night for charging. This could be variable, but even just night time demand should be attractive to utilities. Policy makers will need to think through how best to support EV charging and rooftop solar. Utilities need to consider what they lose when a two EV family goes offgrid. Residential consumption coukd rise from 30 kWh per day to 50 kWh. That's a 60% growth opportunity that utilities won't want to miss out on.�
1/1/2015
guest This is utility scale (which is, frankly, Solar City's biggest competitor). The bids were incredibly cheap. GTM is quite right to expect a massive boom in installations as a result.�
1/1/2015
guest Elon is beginning to sell the "Master Plan". It is the aggregation of renewable energy, electric vehicles, and energy efficiency (think LED lighting) that will disrupt the entire energy industry. I want my children and grandchildren vested in this transition. The declining cost basis of solar panels and LED lighting foretell batteries and EVs.�
1/1/2015
guest This will sound nay-sayer but is also realistic. It will take some time but the utilities and markets, like PJM, need to think ahead. It looks like the growth in new ICE vehicles sold is larger than the total Plug In market in the USA. See data here. Meaning, more new ICE sold "in addition" to the prior year's sales outpace total plug-ins. They need to see that balance change so that more new plug-ins are sold per year than the growth in the ICE market to indicate a ground-swell. Especially in China where the # of new ICE per year is far bigger than the # of new EV. China wants to do something about it - they know things are not looking good. Companies in the China sales regions are rapidly responding, which is good. Not that the quality is good but that they are offering some lower-priced vehicles for the lower-paid population to choose from.
It's much like when a family decides not to have children due to the growing population - there are dozens of nearby families out there having lots more children. Especially those indoctrinated by religions who "help" using scripture to facilitate growth. The "fix" is that government mandates get stronger for plug-ins, their prices fall dramatically, fuel for them is visibly much cheaper, the public charging grows far more extensive and the culture begins to adopt the change. All of that has to happen including showing how buying a Solar PV is the right thing to do when you add an EV or two to the family. My own Solar PV array makes far more kWh than I use in the car. And if you cannot add Solar PV, there should be supportive laws to support community solar where shares in a solar farm can be bought and apply for the ITC for your portion. We subsidize farmers to make or not make crops, to pour milk down the drain, etc. Why not subsidize them well to use half of their land for solar and wind? I don't even think we need farmers that much. Use the scrub land of the mid-west through western states.
Interesting stats today - the breakdown of top Solar cities. It can also show the top-heaviness of CA.
Report Ranks Top Solar States Of 2015 :: Solar Industry�
1/1/2015
guest That's true, but is quite good that the country is opening up to solar. Distributed solar is essentially competing against the cost of transmission and distribution. So it will find niches virtually everywhere. Another thing is that Mexico has a federal virtual net metering law that is very favorable for allowing industrial and commercial entities set up generation assets anywhere and send power through the grid to where it is used. So virtually every business could tap into utility scale solar wherever it is cheap.
There may even be ways to tap this for residential. Imagine a massive GW scale solar farm where you own say 4327 W of its solar and 7789 Wh of its storage. So you get to use virtual net metering to access that at your home or business. This is sort of a timeshare type of model.�
1/1/2015
guest So I'm reading that SCTY is planning to ramp the entire 1GW of Buffalo capacity at once rather than in chunks like the TSLA gigafactory. Should be a big boost in the fall.�
1/1/2015
guest I wish they would expand into more states. I would be FAR more likely to put solar PV on my roof in Missouri if I could get Solar City to do it. Honestly, I don't really trust anyone else.�
1/1/2015
guest Put-call parity is broken down in SolarCity options. For example, implied volatility for an ATM Call April 22 is about 0.75, but for Puts IV is about 1.20.
This is a telltale sign that shares are very expensive to borrow and puts are in very high demand.
I do not recommend buying options when IV is high, but this may be an interesting opportunity to write a put contract.
Regardless, SolarCity is gaining in share price even as sorts are desperate enough to pay a large premium for puts. So we've got strong buying pressure that shorts cannot tamp down.
"The suspense is terrible. I hope it'll last."
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1/1/2015
guest Donors seek to harness Hollywood to boost liberal causes
The focus of Tesla from the beginning was to build a compelling car. I have always believed that the challenge of climate change and Tesla's "Master Plan" ought to be told as a compelling story. Since West Los Angeles is the center of Tesla's world, since it is inhabited by an amazing population of progressives committed to advocacy of good earth tenets, since these same folks are in fact the most renown storytellers of history, doesn't it follow that they would volunteer to tell the tale, spin the yarn, film the story.
Consider for a moment, the finest screenwriters, the world's best actors, the most talented cinematographers in industry coming together for a project driven by passion. Coming together to change the world.
Just thinking out loud.�
1/1/2015
guest It's an awfully big leap to set up in new markets that don't have substantial state subsidy and substantial existing demand. Very much a Catch 22. This is why install costs, and most importantly customer acquisition costs, need to come down rapidly and they are to a degree. SCTY can afford to set up shop in Missouri without state subsidy so long as all the customer simply sign up online and they don't need to have people sit in your house and convince you to buy. That's the issue.
That's the beauty of the SCTY PPA model and their value proposition. They're taking the hard road now so that when things get a bit more mainstream they are up to scale, have been around forever, provide the best product and therefore engender the greatest level trust from potential customers.
It's starting to look like there will be no other PPA option operating nationwide in the summer of 2018 and it'll be a massive undertaking to build up such an operation without outsourcing the most of the work-effort in the years that follow. Their premium will be easily justified and they will have no real competition. Yikes.�
1/1/2015
guest I have to admit I googled this to try and understand it. Does this result in upward or downward pressure on stock price, or is it strictly an arbitrage opportunity with options?�
1/1/2015
guest LOL I was just reading a Morningstar Quantitative Equity Report of SCTY dated 6 Apr 2016 and it referred to the solar ITC dropping down to 10% in 2017 under the Bear View summary. I get that these might not be updated very frequently but it referenced an analyst note from Andrew Bischof, CFA, Eq. Analyst, 11 February 2016 which explicitly states "We believe the solar investment tax credit continues after dropping to 10% in 2017." Are these analysts really that clueless about the companies and industries that they rate? How many companies does a typical analyst rate? Are they overwhelmed and going off of skimmed quarterly reports? Are they phoning it in? I feel infinitely more educated just reading this forum.�
1/1/2015
guest SolarCity selling tax credits to finance growth - The Buffalo News
�
1/1/2015
guest SolarCity: There's Sunshine in SCTY's Future
Another article covering SREC securitization.�
1/1/2015
guest SCTY expands into Western PA. It would be an interesting exercise to guess why SCTY is willing to move into a fracking state like PA where grid prices are super low.
Also, Pittsburgh is going to be an active market in the west, but Philadelphia still has no SCTY while the immediate Philly suburbs do. Unions? To many flat roofs? Poverty/avg credit rating?�
1/1/2015
guest Charles Schwab went from paying 23% for SCTY shares, to 25% on April 7, to 28% today.�
1/1/2015
guest Philly has issues. One thing is 4% Earnings tax for operating in city limits. With a tight margin business, that won't work.�
1/1/2015
guest Wage tax is for employees and more than offset by much lower property taxes. It has to be unions, not wanting to deal with the customer base, permitting process...
Though the base of operations is in the suburbs, so perhaps the extra wage tax hit for working jobs in the city would need to be considered. I was just surprised. It'll be interesting to see if they start doing commercial installs, but not residential.�
1/1/2015
guest What I just wrote to Senator Nelson (my rep):
Message:
Senator Nelson, I'm worried about why you have a hold on the energy legislation currently being considered by the senate. I understand and agree that further fossil,fuel exploitation especially offshore drilling is not desirable. However, if we hold up legislation the further encourages solar and wind penetration as well as energy commerce rules we may be missing the opportunity to put the final nails in the coffin of fossil fuels. I believe we are toes over the precipice of a clear economic advantage of alternatives to fossil fuels. Right now Tesla Motors per KWH cost of storage is very close to breaking the sub $100 per KWH level. The completion of,its first gigafactory in Nevada is all that is needed to achieve this level and lower. Storage at this price point and capacity that the factory will bring on will end the argument on an economic basis. I now see that the way to end offshore drilling and our fossil fuel economy is to strangle it by allowing solar wind+storage to be unimpeded by utility monopoly rules and regulations that make it difficult and/or illegal for distributed energy to take hold. As you know the utilities in FL have a deceitful ballot measure to cement their monopoly, stop free market capitalism and dismantle the current net metering laws on the fall ballot. Federal policy on energy to stop the state to state differences may be the key to defeating the incredibly strong forces lobbying for their very economic fossil fuel legacy business models. This economic change must be shown for what it is, an economic boom machine that will be and is unstoppable. Again, between wind/solar+storage and sustainable transportation (EV's) all aggressively becoming economically available to middle income America, this is the train that will end the threat of further drilling/fracking etc. as it just flat out becomes a non business solution. Remember what happened to,the whaling industry when "rock oil" displaced it and what happened to horses. They were RUN OVER by fossil fuels for both cost and convenience. Last week 325000 people put down $1,000 for a compelling, affordable American built car, virtually sight unseen! This is one canary in the coal mine that must heeded. It is also a path to accomplishing the task of transitioning to the Fusion (solar/wind+storage) which will result in the desirable consequence of drilling offshore becoming economically unviable. Boom problem solved. Please press hard to make this legislatively possible. We have voted with our pocket books and enjoyed having the sun provide almost all of household and transportation energy needs via 12KW of solar utility intertie and 2 Tesla Model S's. This is for my daughters and their generation. Please, let's make the next gen say "those guys gave us a gift" Thanx Dave Israel (U and Patrick... gotta keep ya in DC)�
1/1/2015
guest Senate Energy Bill Still To Clear Hurdles Before Floor Action; Renewables in FAA Reauthorization; Methane on the March | Capital Thinking
Our do-nothing congress continues to do nothing.
Davecolene0606 you have my respect for possessing the strength of character to act upon your convictions. Well done Sir.�
1/1/2015
guest What happens to the Flint bill and the net metering grandfather rules if these tax break extensions are achieved through amendment of the FCC bill?
There's a big thing in the House on Wednesday regarding the Flint water crisis, hopefully public outrage spurs the bill through the Senate.�
1/1/2015
guest Well played.�
1/1/2015
guest When PA lost the solar incentive, it didn't look like they were going to enter PA. But they have bought-up at least one suburban installer, MainLine Solar, and integrated them into the company. They were a small installer and the employees fit the Solar City mold. There are still a good number of independent solar companies in PA and many do very good work. The ITC extension and lower product prices are helping them stay in business for a few more years.
Philadelphia work may be unions. They also have the office of L&I which is really an overseer of many things. But even for employees who live outside the city - they still have to pay 3.4% in wage taxes for work done in city limits. Either the company pays it (and hurts the profit margin) or the employees pay it and it is not much fun to pay 3.4% more for the "privilege" of working there. Or you can try to work in the city without reporting and that can be a dangerous thing longer term if a disgruntled employee blows the whistle.�
1/1/2015
guest When writing politicians, lines like the one bolded above are actually a threat. They imply that people want to hurt a segment of the business world, including other Americans who have viable jobs. Maybe take a different stand and say things like "slowly, but steadily, move off our heavy reliance on fossil fuels and transition those jobs and tax revenues to other high-wage positions in the renewables energy industry." Retaining and re-purposing businesses and jobs is key to a smooth and vibrant transition to the next century's primary growth industry - alternative fuels and energy distribution." Also, by naming names of specific companies, politicians see constituents "picking winners". Naming names is the fast way to be ignored by a politician. How can you help people - your co-habitants of this nation. How can you help your brother succeed through intelligent change? Through naming names, you indicate to a politician your intent to showcase one public company whos stock you may have interest in bolstering. Policy, the lifeblood of the politician, is blanket-based (across the populace) and not specific to a named company.�
1/1/2015
guest Would love for you to post the letter/s you've sent to your state senators and other politicians. Then we'd have that perfect example.�
1/1/2015
guest I'm not entirely sure what to make of commentary like this.�
1/1/2015
guest I've worked in the State Department and in conjunction with the communications office years ago. I know how little good some letter writing actually does. Also have seen many politicians request "what will it do for the majority of my constituents?" as their primary reason to even listen to a topic. A politician has to work for the body of the people and their averaged interests. No matter how much good something can do. The problem with politics is the nature of politics. It's not like being a parent where you can and should change the child. Making change in politics is nearly impossible because the body politic is so hard to please as a whole. Look at the disconnect now between the mindsets of Trump supporters and the Bernie supporters. Entirely different sectors.
The way renewables make the most charge-ahead is by dropping the incentives and surviving incentive-free. That removes a lot of the stigma that some groups are crowing about. This may include trying to transition from ITC to state-based PUC driven incentive programs. For instance, instead of 30% ITC, there could be a $.50/kWh FIT or similar production incentive. That is well above market rates for generators to ignore. Then you get the large-scale power producers ramping up larger many-MW sites. FIT is how Ontario grew its solar initiatives. But ITC does not require production levels to be good. You can install on the wrong side of a house or have huge shadow effects - the ITC payback doesn't care. Make renewables consumption-based to grow the most.
CA and NY are way ahead in giving away money for renewable programs - but those states also supplement the ITC as well making for enormous incentive packages. But to make for national programs that are equivalent, each state needs to see the value similarly. Every state wants power. Not every state is ready to hand over the $ Billions to do it in large-scale. And the only way to reach senators and congress (state or federal) is through influential lobby programs and action committee groups (also PACs) who may have some "big name" members.�
1/1/2015
guest I think he/she was saying that it's rude and off-topic to critique a letter that's already been sent to another member's legislator.�
1/1/2015
guest Sarah Palin and Bill Nye featured in anti-climate change film
Sarah Palin vs Bill Nye, the jokes will write themselves.�
1/1/2015
guest That is what they are paying to borrow the shares from customers?�
1/1/2015
guest So oil is up, SCTY is up and crazy short interest still. The suspense is killing me so I picked up some $40 J18's that I'm Okay keeping long term but will eagerly sell if there's a big move up. 3 times cheaper than the onese I already have at that strike, ugh.�
1/1/2015
guest Yes.�
1/1/2015
guest So,
a) you don't have any examples of letters you've written to your senator or other state officials/politicians for us to read as excellent examples, and
b) you just wanted to trash someone else's efforts to make yourself look good, because you believe from your own experiences that it doesn't actually matter how good or bad the letter is written, it will be ignored.
�
1/1/2015
guest bonaire's post was informative and helpful for someone who wanted to improve the impact of the letter they send. No value judgement in that one, just useful, relevant information coming from experience. The fact that you see it the way you do tells a lot more about you than about OP.�
1/1/2015
guest I didn't find it informative or helpful. Did you not read his second post on the subject? Let me quote you his first two sentences just in case you missed it: I've worked in the State Department and in conjunction with the communications office years ago. I know how little good some letter writing actually does.
TheTalkingMule got it exactly right, but I gave Bonaire the benefit of the doubt (against my better judgement after reading his opinions on SA vs what he posts here) and asked him to share with us all one of those perfect letter examples he talked about that he'd written to his state senator. That way we could all get it right next time any of us wanted to try to make a difference. Instead Bonaire came right out and said, 'I know how little good some letter writing actually does.' So, what was his point of dissecting Dave's already sent letter? At least Dave is doing his part and trying. We now know Bonaire isn't going to bother.�
1/1/2015
guest It seems that SolarCity's stock price seems to be moving in parallel with crude oil. This would explain recent price gains.
I had tried to see if there was a correlation, but the relationship seems unreliable over time, sometime positive sometimes negative. More recently before the end of 2015, SolarCity had a tremendous run up owing to ITC extension. And this was contrary to movement in oil and made recent correlation negative.
So I will be taking a second look at hedging SolarCity by shorting oil. If you are interested in this, I will be posting on this topic in the Shorting Oil Hedging Tesla thread.�
1/1/2015
guest THE MAN IN THE ARENA
Excerpt from the speech "Citizenship In A Republic"
delivered at the Sorbonne, in Paris, France on 23 April, 1910
download PDF of complete speech
It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.
I say, write the letter. Act upon those things you believe to be moral imperatives.�
1/1/2015
guest Top U.S. coal company Peabody Energy files for bankruptcy
Good things happen, when good men do the right things.�
1/1/2015
guest That's surprising, they were paying 4% for tsla as of a couple weeks ago.�
1/1/2015
guest TSLA has been at 3% at Schwab for a few weeks at least. You might be thinking of another brokerage.
You mean "surprising" that it is so high compared to the rate for TSLA?�
1/1/2015
guest Regarding letter writing - I was trying to state that politicians do not want to be told which company is doing what and also which will "put the final nail in the coffin" of certain industries. Their own people/constituents and even family members may be employed there. Rather, look at ways to say that the new industries offer a far better long-term alternative for humanity.
Do I write letters now? No. The reason is that they do no good. I've written to my state representative to ask them to vote for certain bills in DC regarding climate initiative. I never keep copies of what I send through the onilne access portals for reps. I have republican federal representatives here and trying to get them to do good in DC for climate cause or renewables is not exactly going to fly. One of our big city democratic legislators who attended and spoke at a plug-in day three years ago has been indicted on related to their alleged roles in a racketeering and influence-peddling conspiracy. I have a power company who cannot even put together a TOU program after spending $500 Million of government funds to deploy smart meters. And when we write to legislators, instead of asking for more incentives, we need to look at what does the most good for everyone.
Education.
Let's get people educated first, guide them to buy the energy-wise, implement laws for community solar and wind "group buys" to allow shared ITC aggregation. If 100 homeowners paid into a 1MW solar PV array farm, at perhaps $2/watt installation, that does more good for the community than 100 homeowners installing 100 10KW solar arrays on their houses at $3/watt. Cost of scale is what we need for the most common good for the best results. With community solar, you also can have centralized management, centralized cleaning services and a far more expedient installation program. Modules installed per hour on a solar farm blows away home rooftops. But since rooftops take up "zero new land" they make some sense in denser populations. We have to decide; do we want an energy program or a jobs program? Are we pumping our favorite stocks or are we building a truly sustainable future in a very cost effective and fair manner? Maybe we should work under a "profit limit" environment like the 8-A government agency set-asides where prices of installation is limited to cost plus a small profit. Where companies cannot over-state the market value of their installed sites to get the most government incentive payback.
Besides solar farms, next best option would be government owned land such as parking garage-top solutions and building-top solutions on state and local government-owned buildings. They're not going anywhere.�
1/1/2015
guest Senate reaches deal on long-stalled energy bill
�
1/1/2015
guest If news from the Senate move the stock tomorrow that would be a good indicator that it'll move more if the bill passes.�
1/1/2015
guest �
1/1/2015
guest NV Energy-backed group pushes to keep solar rates high
�
1/1/2015
guest You guys see Sune this morning? At one time it was up 102%. There must have been at least a lucky few buyers from yesterday.�
1/1/2015
guest Have you tried to short any SCTY to see what Schwab is charging borrowers? Fidelity is 45% to loan, ~67.5% to borrow. Curious if Schwab has a larger spread or is charging less to short...�
1/1/2015
guest Shorting Oil, Hedging Tesla
SolarCity investors may want to see my post on optimizing a portfolio of SCTY, TSLA and SCO (double inverse oil ETF).�
1/1/2015
guest http://www.nytimes.com/2016/04/14/us/politics/senators-reach-deal-to-act-on-comprehensive-energy-bill.html
I haven't found any mention of the specifics but I'm assuming this contains the NEM rules?�
1/1/2015
guest It just tells me it's "ineligible to be shorted or shares must be borrowed externally" but if I'm willing to short $50,000 worth and pay a fee, I should contact Securities Lending to determine the fee amount.�
1/1/2015
guest I'm not seeing any chatter about FERC rule revisions in this Senate energy bill that would help lock in grandfathering of solar net metering. Anyone have insight on this?�
1/1/2015
guest S.2012 - 114th Congress (2015-2016): Energy Policy Modernization Act of 2015
There are 362 amendments. The one in question is 3120, technically an amendment to an amendment. I wonder what fraction of these massive bills ever gets read, let alone seriously discussed, in congress?
S.Amdt.3120 to S.Amdt.2953 to S.2012 - 114th Congress (2015-2016) - Amendment Text
There are several amendments within THIS amendment which to me looks like a poison pill to kill it off entirely. Sen Menchin from WV slipped in language authorizing a staggering amount of money being spent on "clean coal" programs:
"
(1) Authorization of appropriations.--There are
authorized to be appropriated to the Secretary to carry out
this section, to remain available until expended--
``(A) $632,000,000 for each of fiscal years 2017 through
2020; and
``(B) $582,000,000 for fiscal year 2021.
``(2) Allocations.--The amounts made available under
paragraph (1) shall be allocated as follows:
``(A) For activities under the research and development
program component described in subsection (b)(2)(A)--
``(i) $275,000,000 for each of fiscal years 2017 through
2020; and
``(ii) $200,000,000 for fiscal year 2021.
``(B) For activities under the demonstration projects
program component described in subsection (b)(2)(C)--
``(i) $50,000,000 for each of fiscal years 2017 through
2020; and
``(ii) $75,000,000 for fiscal year 2021.
``(C) Subject to paragraph (3), for activities under the large-scale pilot projects program component described in
subsection (b)(2)(B), $285,000,000 for each of fiscal years
2017 through 2021.
``(D) For activities under the net-negative carbon dioxide
emissions projects program component described in subsection
(b)(2)(D), $22,000,000 for each of fiscal years 2017 through
2021."
I like how anything Obama wants to do is "too expensive" and "picking winners and losers" and solar is "cost shifting" but this douchebag can put billions of pork projects that benefit his home state into an amendment and the tea baggers and budget hawks are totally silent.
The more I read through the text the more disgusted I get. I am getting very disillusioned with the democratic process in this country.�
1/1/2015
guest My generic take on this Congress is they are willing to give Renewable their equal take, in exchange for whatever their now desperate Fossil Fuel interests latest plan to hang on is. The ITC got done in exchange for lifting the export ban...and they need to make another panic deal in a poisoned Congress. Didn't Obama threaten to veto the House version and the Senate is cooking up the finished product?
Maybe it's just Game of Thrones time of year rolling around...�
1/1/2015
guest Yeah, I don't know much about that side of shorting but I would have thought tsla and scty would be about the same, but I guess it's probably demand and supply.�
1/1/2015
guest First Solar Making Panels More Cheaply Than China's Top Supplier
�
1/1/2015
guest (Posted in short interest thread)
3/31 short interest numbers are now on the NASDAQ site and are list SCTY at 23.7M, even lower than the last report. How do we reconcile that with the insane rates being paid to short this stock today? Costs to short SCTY have to be near an all-time high, perhaps short interest has ballooned since 3/31??
I'm trying to figure my plan for the earnings call first week of May. Guidance was revised so low for 1Q16 that I can't imagine they do anything other than outperform considerably, especially given the weather or lack thereof. Will we still get our regular post-call tank? A lot of uncertainty has been cleared up and this energy bill might be nearly the last piece. I'm looking at 2018 $80+ calls and am worried we might run up to $55+ and never get back below.
SBenson, I'd be interested in your 1Q prediction since you've been most accurate for the last three reports. Most of the headwinds we've talked about since October have cleared up or have at least eased to the point of manageability. I think we're nearing a point where the market recognizes all this backend revenue and value as valid. To me it's an 80% certainty to be recognized by the 3Q16 earnings call, but what are the odds for this call? I think 10-15% is fair odds, perhaps 20% since the weather was nice. Thoughts?�
1/1/2015
guest Mule, I am flattered that you asked for my opinion. I didn't get a chance to do any sort of deep dive. But my gut sense is still very negative towards SC. The recent financing rounds deal with the near end of the curve. What we really need to see is monetisation of the outer years. More ABS, or ABS of out years, or sale of assets (leases/ppas). We haven't seen any of that except one very small positive deal a few months back. More importantly, they stopped releasing the interest rates on the new credit facilities, which is suspicious. The firm is still very much in survival land is my gut sense.
Separately, just now checked IB rebate rates for shorting. They are north of 107% !!!!
OMFG what is going on here? The only explanation I can think of is that the firm is at a brink of a liquidity crisis and some folks know something inside... Think about it, as SC goes around asking for money (credit), more people will get to see their books, the information leaks and spreads. Otherwise why would anyone possibly pay that kind of rate just on merely speculative bet. They would have to be 100% sure to place a short bet like that.
I'm just merely staying out, watching from sidelines.�
1/1/2015
guest Have you guys seen what's happened to SUNE (formerly $30 stock, now $0.35)? I don't think this will happen to SCTY, but solar companies in general need to be careful and not take on too much debt!�
1/1/2015
guest So want happens to the solar industry if SC goes under? They are the number 1 installer at the moment......�
1/1/2015
guest Well, they were also paying 85% to short TSLA when it was at $30 so you can't just automatically assume people know something based on the short interest.
I would think that if there were any glaring problems with their books, the companies that they opened them for probably wouldn't be agreeing to lend them money after seeing them.�
1/1/2015
guest I think they had a tough time in Jan/Feb just like everyone else and decided that not including interest rates was a good idea, which it wasn't. Solar companies are so used to bending the truth that they seem to be having a hard time in a world where solar really truly IS the cheaper option.
I think they're over the hump here, perhaps not in sentiment, but it reality.
SolarCity Financing Concerns 'Alleviating,' Deutsche Bank Says
SolarCity Gains 4%, Deutsche Bank Sees More Tax Equity Transactions Over Next Few Months Boosting Shares
Keeping in mind this is precisely the setup of TSLA prior to the 2013 squeeze from $30 up to $120+. Shorts see SCTY as an inevitable failure, so they're doubling down....and doubling down.....and doubling down.
My concern isn't so much around IF a run-up will happen it's when. I think we may be underestimating the impact of the lowered guidance from a couple quarters back. 180MW for 1Q would only be 18% yoy growth, by far the lowest ever. Does that seem likely?
If they come in well above 1Q guidance, announce lower 2017 cost guidance AND the Senate all but locks in grandfathering of net metering......anything could happen. That being said, I'm inclined to agree with the negative sentiment. The world just hasn't woken up to SCTY model yet, just like no one bought into TSLA until a certain amount of people actual drove it.
Probably one more quarter of chaos.�
1/1/2015
guest Wasn't the rate briefly above 100% a few months back when we all got excited about a possible short squeeze? As I understand it it's only a matter of supply and demand. Desperate shorts trying to keep a lid on stock price willing to go that high. Fortunately for them I think falling oil prices may help them this time too.�
1/1/2015
guest My favorite Elon Musk quote:
Optimism, pessimism, f@%k that; we�re going to make it happen. As God is my bloody witness, I�m hell-bent on making it work.
Elon Musk has built an electric car that is outselling it's ICE competition from Mercedes Benz in Europe. He is delivery payloads to outer-f@#king space. He has developed built, and deployed reusable rockets.
Yet there are those convinced he is failing as Chairman of the Board of SolarCity. In the words of the Virgin Mary, come again?�
1/1/2015
guest HBO's VICE Interviews Elon Musk on "The Future of Energy"
SolarCity is an integral of Tesla's "Master Plan".�
1/1/2015
guest Question:
SCTY has guided for 180MW in Q1 which is down ~30% from the ~250MW they installed in Q4. They've recently been talking about reducing sales costs to get the cost per watt down but it seems likely that they'll have pretty much all the same sales staff employed in Q1 as they did in Q4 (minus a few from Nevada presumably). So their total sales cost in Q1 seems likely to be not that different from Q4, while installed watts is down 30%, so it appears that sales costs per watt are likely to be much higher now. Is this a fair evaluation? A jump from $0.60/watt to $0.80/watt would look pretty bad even if it will reverse the following quarter.�
1/1/2015
guest Q1 of every year for SCTY is a down quarter. Last year they dropped from 176MW to 153MW Q4'14-Q1'15 (link). Hard to install lots of solar panels during winter.�
1/1/2015
guest Sales people work almost entirely on commission, so less sales equals less cost. And they were cutting some of the more expensive means of closing sales. Not exactly sure what they meant by that,perhaps paid leads.
Guess how much commission the salesperson gets for each panel that goes up......�
1/1/2015
guest too much is my answer.
all in, nil subsidy, first world labour rates, solar should not be more than $1,200 per kW for a 6kW or larger system, with German inverters, make it $1,000 per kw with Chinese inverters.
if SCTY 'marketing' commission is $400 per kW, then thats an unnecessary 40% cost burden on the price of domestic solar.
Its also a cost burden that utility solar does not pay. another reason why 3.8c - 4.5c /kWh is not cherry picked, just representative of 2016 pricing. (although there are estimating involved for utility solar)
i think the major headwind for SCTY's financing is not sector wide issues, or market wide issues,
its the growing realization that charging 11cents/kWh plus a 3% escalation is not a bankable asset vs utility solar at 3.8c-4.5c/kWh. Yes the FICO scores of the homeowners may be great, but the asset itself is very overpriced. As the year goes on this becomes more and more obvious.
what is also obvious is that the shorts were too greedy, slow squeeze is occurring now.�
1/1/2015
guest This article adds quite a bit of color to the "Energy Mondernization Act".
Senate�s On-Again, Off-Again Energy Bill On-Again - Exchange Monitor
It is still difficult to expect anything from congress.�
1/1/2015
guest The problem isn't the price, it's the cost. Going solar with just a signature while undercutting the grid and will be considered one the the great products of our time, it's just not well positioned in the consumer's mind yet. People can't figure out if it's the Walmart, Amazon, McDonald's or Uber of energy.
Acquisition cost is keeping SCTY from offering a bit more flexibility around escalators, contract length, etc. So we have a bit a of chicken/egg issue here. If they had that $.67/W back to play with, all these little annoyances could be taken care. But I think we've now seen what happens when you try to find a way around real customer acquisition.....
SunEdison probe reveals 'overly optimistic' numbers
In answer to the sales commission cost....it's $32 per panel. And that's just for the outside sales rep. Once they figure out how to let people simply order SolarCity online it's game over, and to me that's an inevitable reality.
Half the market will be attracted to quality hardware installed inexpensively, the other half will be attracted to the zero-hassle model. Competition in zero-hassle is getting mighty thin, just need to get over the marketing hump.�
1/1/2015
guest Finally scty is over $30.�
1/1/2015
guest SolarCity and SolarEdge are both up substantially. I point out SolarEdge because SolarCity is its leading customer. The market seems to be bullish on installations.
SolarCity put/call parity continues to be broken. This thing is way over shorted.�
1/1/2015
guest I am still mostly confused what the market or shorts are so afraid of regarding SCTY. Their costs are dropping and once Riverbend and GF1 are online they will be able to sell retail power competing directly with the grid pricing. Maybe I'm the sucker for missing some critical flaw.
Regulators Reject Third-Party-Ownership Petition in North Carolina
�
1/1/2015
guest Well this is a surprise. I sold all my shares late last week in anticipation of oil plunging and taking down SCTY, but oil being where it was on Friday and SCTY being UP $1.50 is surprising. Looking to get back in, but hesitant. I always seem to panic and buy/sell at the absolute worst time.�
1/1/2015
guest With earnings right around the corner and a 10+% drop after the last few quarterly calls it may be safe to hold off a couple weeks to gauge the immediate response to the call. It sure smells like "the market" is just creating volatility for volatility's sake. Buying as the stock naturally drifts upward then sowing irrational doubt and shorting the quarterly tank. These people must just make money hand over fist.
To me it's a greater sin to buy at $30 before a tank to $24 than to miss buying at $30 and buy at $40. Remembering of course that this whole range is irrational. Anything below $50 is a bargain when you're targeting $160 within 12 to 36 months. That's my psychotic logic.�
1/1/2015
guest I have been thinking the major catalyst is as soon as this week if the Energy bill gets voted in, much like what extending the ITC did for SCTY.
�
1/1/2015
guest Tomorrow is do-or-die for the Sanders campaign, needs to win NY by 6-10pts or so to have any real chance. Might have some interesting SCTY impact if he does very well.�
1/1/2015
guest I buy at any technical entry points, then prepare to add more during a deep pullback. The long-term (10+ years) upside of this stock is greatly under estimated by the market. The downside risk is greatly over estimated. The method I used to value this company is trying my best to predict where this company will be in 10~20 years, instead of paying a lot of attention to what will happen in one or two quarters. One thing I know for sure, is this company will install huge amount of solar panels in the next 10 years. Elon said so.�
1/1/2015
guest I think in 10~20 years the concept you would ever need a public utility to provide something as simple, cheap and ubiquitous as electricity will be as mind blowing as a desktop computer in every home having been eclipsed by a smartphone in every hand across nearly the entire planet.
In Energy Politics, Simple Wins, But Simple is Usually Wrong
�
1/1/2015
guest Wow, that article is really badly framed. It presents a strawman argument and a false binary choice between coal and natural gas.
We need renewables to displace both. The debate right now is whether we need to go straight from coal to renewables or use natural gas as a bridge between the two. The author is probably enough of a sophist to know this and not to mention it. So this is pure propaganda for the "we need natural gas" camp. Gas producers are feeling threatened. In January FERC reported no new gas capacity added to the US grid. That's right, gas is getting edged out of the new power plant capacity market by renewable. Increasingly the US grid is going straight to renewables.
Moreover, this year the US will add about 9.5 GW wind and 16 GW solar. That's enough to generate 135 GWh / day and offset over 1 BCF/d of natural gas.
Where the antifracking people get it wrong is that we actually do not need to ban fracking to stop it. All that is needed is to continue to step up renewables at a pace that no new gas wells or coal mines are needed. We are just about at that scale this year. Already there is such a glut in both coal and natural gas that prices are below $2/mmbtu, which is unprofitable for both industries. So continuing to step up renewable will keep these price unprofitably low and will remove economic incentive for incremental fracking.
The author tells something which is fundamentally untrue about renewables. He presents the push to 100% renewables as something that requires government meddling to accomplish. The idea that renewables are dependent on politics to succeed and cannot compete on simple economics is wrong and misleading. It is actually gas, coal and nuclear that depend on politics for their continued existence. They depend on anticompetitive government sponsored monopolies. Opening up the utilities to genuine competition from distributed generation would drive coal and natural gas out of the market at an accelerated rate.�
1/1/2015
guest First Grid-Scale Rail Energy Storage Project Gets Environmental Approval From BLM
ARES uses electricity from the grid to drive loaded locomotives up a grade. As the train cars descend, their motors then act as generators and provide electricity to the grid. According to VP of operations Francesca Cava, the round-trip efficiency of the system is 85 percent.�
1/1/2015
guest Senate Shows It Can Make a Deal on Energy�Just Not a Big One
�
1/1/2015
guest Supreme Court rules against state power plant subsidies
More details:
BREAKING: Supreme Court rules in FERC's favor in Hughes v. Talen power case�
1/1/2015
guest What we've seen so far is the fossil world activating their puppets in Congress to cover their needs regardless of consequence. This allows other members of Congress to insert any old renewable energy language they like and it still passes. To me, this is a net positive since renewables will win on any vaguely flat playing surface.
Fossil interests are selling their future in order for individual players to survive a few more moments, make their boatload and get out before the whole thing comes crashing down. I'm semi-fine with that so long as we can get fair rules set in stone.
So if there any word on this bill grandfathering net metering at a federal level? That's the rumor on here, but I'm not seeing it definitively in the press. Considering the SCTY stock action on plummeting oil, I have to think it's in there.�
1/1/2015
guest ![[?IMG]](http://coconutheadsets.com/wp-content/uploads/2009/12/sisyphus.jpg)
�
1/1/2015
guest Solar is now cheaper than coal, says India energy minister | Climate Home - climate change news
�
1/1/2015
guest There has been mention of the possibility of a looming short squeeze but there appears to be no real catalyst for it. Is the 2nd quarter ER likely the best catalyst for that?�
1/1/2015
guest I'm in a New York state of mind.
Hillary Clinton wins New York primary
Elon Musk Helps California Rank No. 1 for Hillary Clinton Fundraising
Hillary Clinton back in Atherton for another fundraiser
New York Utilities, Solar Companies Offer Alternate Payment Plan�
1/1/2015
guest Let's get more info on this alternate payment plan. From the Bloomberg peice, I can't quite tell what solar installers really get from this connection.
I have long favored a virtual net metering alternative to net energy metering. The key difference is that in NEM the utility is the buyer of surplus solar power at residential rates, but in VNM there are third party buyers of surplus power and the utility is merely compensated for distribution service between the buyer and seller. What I like about VNM is that it truly moves to a free market solution. Buyers and sellers agree to whatever price they contract at and the utility is not obligated to participate in that transaction other than to provide distribution services. Tranditionally, utilities have fough this because it actually cuts into their monopoly. Could it be that some New York utilities are starting to see the light on this. So long as utilities demand to be a monopoly seller, it is incumbent on regulators and legislators to oblige these monopolies to buy surplus solar power at some regulated price. So VRG gives them a way to avoid being an obligated buyer while preserving a monopoly on local distribution of power. The writing on the wall is that there is practically no profit to be made from generating power, but operating a distribution network had durable value as energy technologies advance. So it is time for utilities to get out of the business of controlling buying and selling power and simply be a network operator. My hope is that NY other utilities are warming up to this reality, and we can finally get past all the nonsense around NEM.�
1/1/2015
guest I've started an American Fossil Divestiture thread in the Energy forum to track the reaction of utilities to renewables. Tactics like what we've seen in Nevada will buy you a bit of time, but are not long term solutions. It'll be funny to watch the spin as utilities try to sell off all their "valuable" production capacity.�
1/1/2015
guest Did you see this official press release? It has a link to the proposal doc with a lot of detail.
Six Investor-Owned Utilities Join Solar Companies in Landmark Proposal on Long-term Solar Growth in New York�
1/1/2015
guest Zooming past $33, up 9+% in the early going.�
1/1/2015
guest I don't really get the short dynamic here. Whether we look at exchange data or MarkIt data, the short interest is stable. BUT the rebate rate is going through the roof. The rebate rate was supposed to be based on supply-demand. If demand is constant, supply must be shrinking somehow. I wonder if management figured out a way to squeeze the supply and thus put some heavy pressure on the shorts through the ever higher rebate-rate. The price action and the rebate rate dynamic looks like a short squeeze to me.�
1/1/2015
guest Exactly. The indications we have here based on price and cost to short just haven't been matching up to the number of shares shorted when they get announced every few weeks. There's no way the shorts are fluctuating that much day-to-day. That being said, I know nothing of short market dynamics.
Inside 1Q numbers could easily be floating around.....
This NY plan may have folks thinking......
Zooming past $33.50 up 11+% thus far. I still see SCTY drifting up toward $50 only to get smacked down after the call for seemingly irrational reasons. These clowns are just manipulating the uncertainty and riding the stock on the ups and downs. Nice work if you can get it.�
1/1/2015
guest The supply of shares that can be lent is bounded and inelastic. So shorts are bidding against each other for a finite supply, hence, the rebate rate goes through the roof. But this also means that shorts have no incremental fire power to exert selling pressure on the stock itself. So they are really backed into a corner.
Time to buy shares.�
1/1/2015
guest Hey guys, let's not squeeze them too hard now...I'm enjoying the ridiculous premiums to lend out shares.�
1/1/2015
guest Noob question here but how exactly do you lend share to a short? What are the potential negatives for the individual loaning the shares?�
1/1/2015
guest Your brokerage has to have a program, you have to qualify, then they will either solicit you or you have to call in and ask. More info in the Tracking Short Interest thread.�
1/1/2015
guest Kaine applauds Senate passage of Energy Policy Modernization Act
Loving this.�
1/1/2015
guest Did I speak too soon......can't find anything on the King-Reid Amendment. Was it included?�
1/1/2015
guest I think the House now negotiates updates with the Senate before passage.
Things that seem pertinent to SCTY as of now....
Senate Passes Broad Bill to Modernize Energy Infrastructure
Since passage of the last major energy law, the United States has gone from fearing oil and gas shortages to becoming the world�s leading producer of both fuels. The use of wind and solar power is accelerating as those sources become cheaper than fossil fuels in some parts of the country. And President Obama�s environmental regulations are reshaping power systems as electric utilities close coal-fired power plants and replace them with alternative sources.
But the nation�s energy infrastructure has not kept pace with those changes.
The bill would promote renewable energy by requiring operators of electricity lines, transformers, and other elements of the electrical grid to upgrade the system, with a focus on large-scale storage systems for electricity to better accommodate the expanding production of wind and solar power. The bill would create and strengthen several programs devoted to improving energy efficiency in buildings.?�
1/1/2015
guest This model reminds me of the DSL over copper Telecom type arrangements of the 90's where any DSL reseller paid pennies for access and were able to charge retail DSL rates and turn a profit. If I'm properly understanding the concept of this NY proposal that is. I would think this is absolutely perfect for SolarCity to basically become a modern, hybrid utility of sorts.�
1/1/2015
guest Could you spell this out for me? Thanks.�
1/1/2015
guest Foreigner question: What does it mean, that the senate passes this bill?
Can it be stopped now? How possible is that?
And what does the bill mean in consequences for the Solar and battery industry?
The most stuff I can follow at TMC, but there knowlege-gaps on how the US-legislation works.
Maybe someone can help me out.
Greetings
Earl�
1/1/2015
guest Well, it seems to me this agreement is that SolarCity pays a nominal fee (wholesale grid maintenance) but is guaranteed access to grid services in exchange they can resell on the retail market. Instead of giving the net metering to the end user they are giving it to SolarCity (any grid re-seller) who then is the new customer facing utility? Also for SolarCity they can offer a competing off grid battery option as well?
I was thinking of how Speakeasy was a DSL ISP in Seattle...running their network over QWEST Telco copper lines. As I remember it they offered better service, speeds and pricing than QWEST did over their own lines.
�
1/1/2015
guest Quick response not meant to cover the detail
In the US all legislation requires passage by both Houses of Congress (House of Representatives and Senate). Typical of our process here, a similar bill was initially passed by The House last year. This one now passed by the Senate all but assures passage of final, but first a conference committee works out the (usually) small differences between the two bills, then both Houses should pass the same final bill (normally that process is fairly quick from here). Then it goes to the President for signature or veto. Obama expected to sign this one. So should be fairly clear sailing from here (theoretically of course).
Generally the bill is supportive of Solar Wind, requiring Utilites to accommodate them I hadn't looked at details myself - others have posted it locks in Net metering and other. I'll let others detail the bill itself�
1/1/2015
guest An Unlikely Alliance Is Born in the Battle Over Solar Power
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1/1/2015
guest Here is a very interesting article about how the future of solar could be affected by "value deflation". In a nutshell, the marginal value added by new installations drops over time, due to the fact that beyond a certain level of solar penetration overproduction is inevitable. Increased grid redistribution capacity, intelligent demand smoothing, and energy storage can alleviate but not completely solve this challenge. The article concludes that in order to stay competitive in the long run, the price of solar must be dropping much faster than it already is.
The article doesn't seem to have an agenda. It has a neutral, even solar-friendly tone, seems well-researched, and provides many supporting links, some to other studies (I have not followed those links). It is a worthwhile read.
How cheap does solar power need to get before it takes over the world?�
1/1/2015
guest Hi all,
First time post, long long time lurker. I got the dreaded e-mail from my broker today, saying that they are returning my loaned SCTY shares (and no more 28% interest on those shares). I would have expected that instead they might have backed off the interest paid, but I probably got dropped because I was a late comer to the program (my shares were only loaned out for a 1.5 months). I believe that priority goes to those who have been in the program longer. Oh well, still getting paid to loan my TSLA.
Anyway, I rather expect that the squeeze has hardly begun, and I'm in no way ready to sell, but I'm curious what experience others have had with loaned shares recently. Also, can someone remind me when/where we will get next short interest numbers for SCTY?
And just a brief context on myself and SCTY: I'm only recently above water, having accumulated shares on the way down over the past few months for a current basis of around $29/share. And this little pot o SCTY shares constitutes my "dry powder" for accumulating more TSLA on some future pullback there. I bought SCTY on the way down thinking that it's share price is likely to outperform TSLA for the foreseeable future, choosing SCTY even when TSLA was at it's recent lows, betting that SCTY could see 2 or 3x gains or more before TSLA. So the play just described constitutes my only short-termish move. Other than that, I've been long TSLA and accumilating shares since 2012. No margin accounts, no options, and not really a savvy invester, just taking advantage of the future that is laid out for all to see if they just look.
Finally, thanks to those on this and TSLA short-term forums, for cluing me in to the share loaning program. I know there are mixed opinions about whether loaning shares to the shorts is wise, but my view is that if the company is sound any effect on share price from the shorts will be negated in the end with the inevitable squeeze.
Thoughts on any of this would be greatly appreciated, especially on the subject of my SCTY -> TSLA play.
Regards,
Doug�
1/1/2015
guest Interesting how the former energy sec was promoting natural gas and saying it was low carbon emission "bridge fuel." However, as we all know, the real problem is currently methane emissions which is 25X worse then co2(in addition to ground water contamination and earthquakes). Over the past 9 years we've seen a massive uptick in fracking/natural gas extraction in the us and in various areas of the world. Coincidently, Over that same time period , we've seen a dramatic increase in global temp rise while at the same time we've claimed a reduction in co2 emissions. Hardly a strong long term energy policy to espouse as a working solution to climate change.
Also, not one mention of distributed energy resources even after the little segment on Solarcity and Elon energy storage. Storage was mention as "grid storage." Nothing mentioned about a network of distributed energy which is (as many argue here) actually materializing as potentially the center piece of our future of energy network infrastructure in the us.
The nuclear fusion piece is so far down the road in actual business model application I don't even know why they mention it in such a significant way as the climate change and fossil fuel transition needs to be conducted over the next 20-30 years, not starting 20-30 years from now with fusion. The mini fission reactors will never materialize as a viable business model since the collective waste material would be a massive environmental disaster in its own right 30 years from now.
The episode did get one thing really right: We already have the tech, right now, to transition completely to a sustainable energy economy. Just the fact vice journalists didn't focus on that thesis was a little disappointing, especially when they had access to Elon the entire time.
The question oight not be what is the future of energy, it ought to be how do we expeditiously and efficiently transition to that 100% sustainable energy economy right now. Again, Elon might have had some key insight for the vice journalist... Maybe they will cover this in another episode.
Add:
I'm going to speculate Solarcity will have some type of earth day announcement on Friday. Also, I think we should hear something about the long drawn out (4 years now!)treasury case soon, maybe early May, so potentially a catalyst for the market if it turns out to be a good judgement. Would be one less risk factor in the quarterly so would be nice.�
1/1/2015
guest Thanks, Doggus. Yes, this sounds like a truly awesome opportunity for SolarCity. Essentially they can aggregate surplus solar and sell to a segment of customers. Let's call this segment Solar Consumers. SolarCity's current customer base with solar installations, let's call them Solar Prosumers, as they produce and consume solar power. The Solar Consumer segment is strictly defined to exclude Prosumers.
So suppose I live in a home where a rooftop or other solar installation is not a realistic option. So I cannot become a prosumer, and so up until now I could not become a SolarCity customer at all. But under this new arrangement, I can now become a Solar Consumer. I can buy power from SolarCity that it aggregates from its prosumers. Now this may seem to be limited to buying power at only certain times of day, but with the advent of batteries, it is not. For example, perhaps SolarCity can install a Powerpack at my home. So SolarCity charges my Powerpack to about 90 kWh each day when surplus solar is available. My family uses about 25 to 50 kWh each day. The additional stored energy is available for SolarCity to use to provide grid services and backup to other SolarCity customers. So my Powerpack is supplying 20 to 30 kWh of peak power to the grid on a typical day. Because I am willing to host a Powerpack at my home, SolarCity is able to incremental storage at $250/kWh instead of $430/kWh for a Powerwall. I buy all my power from SolarCity at a low rate in part because I am hosting for them. Moreover, as a grid service, citing a Powerpack in my neighborhood or utility substation creates substantial value for my local utility. My Powerpack provide peak and backup power to my neighbors which minimizes network congestion and improves local reliability. The utility can spend less of network hardware and reliability system redundancies through this mechanism of localized storage. These benefits are in addition to merely avoiding construction of new peaking plants.
So does all this seem remotely consistent with the proposal? Or am I just reading in my hopes? I do think that what I have set out would be mutually beneficial to utilities, utility only customers, SolarCity and SolarCity�s customers. It would also foster renewables and and new industry within the State of New York. It even solves the problem of how rooftop solar can benefit high density urban areas such as New York City.
So this seems to be a win all the way around excluding power producers, especially peak power producers. By allowing SolarCity to aggregate and retail power, it does have the potential to draw SolarCity under the same regulatory scheme that the utilities operate under, but this also has the potential to impact wholesale power markets as well which would draw it under FERC jurisdiction as well. There is lots of complexity here to watch out for. But ultimately this seems to be the sort of direction things must go in. You can't operate at SolarCity's scale for long without coming under regulatory oversight and without needing access to the wholesale power markets too. So a new deal must be struck.�
1/1/2015
guest short on time currently, but a quick comment
There's another 'hidden' risk as well. For the first time in history, energy is a by product of technology and scale (ala semiconductor). Current technologies in the labs etc. may (will) drive the cost of solar-storage to a near zero level (20 year time frame). The market for retail energy in today's curve is a diminishing one to near zero imo. SCTY must structure to balance this curve-�
1/1/2015
guest Did anyone see the curve moving this quickly within the US?
Shock (realizing the impact of solar growth out West, fossil plants can never be built profitably again)
Reaction (knee-jerk sabotage by Nevada PUC on behalf of NV Energy and others)
Counter (many states quickly move to stabilize net metering)
Progress (NY looks like they're laying the groundwork for future energy markets, HI is going full solar micro-grid)
All this has happened in about a calendar year.......which is insane. Where will we be next summer?
Crossing $34 in the early going, up 5%.�
1/1/2015
guest Bloomberg feature: Deputy Crown Prince Mohammed bin Salman is preparing Saudi Arabia for the end of oil.
Sample quote:
"Prince Mohammed picks up the questioning: �How close is Saudi Arabia to a financial crisis?�
Today it�s much better, Al-Sheikh says. But �if you�d asked me exactly a year ago, I was probably on the verge of having a nervous breakdown.� Then he tells a story that no one outside the kingdom�s inner sanctum has heard. Last spring, as the International Monetary Fund and others were predicting Saudi Arabia�s reserves could stake the country for at least five years of low oil prices, the prince�s team discovered the kingdom was rapidly becoming insolvent. At last April�s spending levels, Saudi Arabia would have gone �completely broke� within just two years, by early 2017, Al-Sheikh says. To avert calamity, the prince cut the budget by 25 percent, reinstated strict spending controls, tapped the debt markets, and began to develop the VAT and other levies. The burn rate on Saudi Arabia�s cash reserves�$30 billion a month through the first half of 2015�began to fall.
Al-Sheikh finishes his fiscally mortifying report. �Thank you,� the prince says."�
1/1/2015
guest Great article, thanks for sharing!�
1/1/2015
guest I confess I posted it before I finished reading it. I had hoped it would be more informative of how exactly they are preparing for "the end of oil" and of their thinking process, but it's more of a puff piece. Still, it shows that change is on the way for Saudi Arabia, one way or the other.�
1/1/2015
guest True, but that is for April 25th, no?�
1/1/2015
guest Trying to make sense of the current situation:
- AFAIR Musk was buying at $34 before it got to $17
- Super high short term tension situation: shorts can't be in for the long term with these rates
- Positive Fed level legislative action imminent
The only rational way to explain this is that shorts expect a very negative Q1 ER. If legislative catalyst proves to be as substantial as ITC extension then it should be a repeat of a previous short squeeze: jump and then all the way back to 20's if not lower.�
1/1/2015
guest SunEdison (SUNE) officially files for bankruptcy � Wall Street couldn�t wait
SunEdison Undertakes Chapter 11 Reorganization�
1/1/2015
guest The sentiment on TMC about SolarCity has been absolutely ludicrous. A thread was even started asking what effect SolarCity going bankrupt might have on Tesla. All of this because of oil prices falling and some pundits believing Sunedison's bankruptcy might devistate the entire industry.
As I've said many times, I think it's far more likely Sunedison's bankruptcy will allow SolarCity and others to acquire parts of Sunedison for pennies on the dollar.
SolarCity, Sunedison, First Solar, and Vivent Solar are very different companies. Expecting a pullback, but also expecting SolarCity will go much higher following any new developments. I suspect many more states will begin to require all new homes to have Solar Panels. This will make the transition smoother and will make it easier and cheaper to install Solar Panels on homes. It will also force home builders to work with companies such as SolarCity. Once battery storage kicks in, the cost savings from switching to solar will be even greater.
Also, remember, SolarCity also has a tiered executive incentive package that implies the stock could be worth ~ $40 billon. I'll try to find a link to the document a bit later.
Note to any journalists looking for a topic to write about: There have been very few articles published about this, so it's a bit hard to find.
Note: I'm also eying Yingli. China will do everything possible to protect its solar panel manufacturers.�
1/1/2015
guest True enough, but this is why you don't want to be on the wrong end of poles and wire. As the cost of distributed solar and batteries come down, first thermal electric power plants lose value. Then the transmission lines connecting thermal plants to customers lose value. Then utility solar and wind lose value and their transmission lines. Then distribution networks lose value. Along this curve, it is always better to be closer to the customer.
The distance from the source of energy to point of consumption of energy will shrink. Energy used to begin in some mine or well, transported, transformed and transmitted at great cost. With a utility solar or wind farm the source of energy is at the point of transmission, a much shorter path. With rooftop solar, the sun distributes energy directly to your home or business, and there is no need for transmission or distribution, except for the economic benefits of trading power. But with cheaper batteries there is increasingly less value in even trading power. Next step, you've got solar cars and solar powered personal devices. Spray on solar could remove enormous installation costs. Just spray it on and power up. You could tan at the beach and power your smart phone and personal A/C from the rays bronzing your skin.
The less time, energy and money we use just moving energy around, the better off we will be. If the cost of energy goes to zero, that would be ideal. It will free up much more opportunity to do greater things, like freezing margaritas on the beach while tanning.�
1/1/2015
guest A must read IMO, if you are interested in understanding the developement of oil.�
1/1/2015
guest BTW, those of you who are interested in oil, I post most of my oil thoughts on the Shorting Oil thread and would love to have a discussion of Prince Mohammed there.�
1/1/2015
guest Republicans Are Warming Up to Renewable Energy
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1/1/2015
guest
SolarCity's Rive Gets $77 Million Grant Just Like Musk at Tesla
"Rive has ten years to earn as many as 3 million stock options with an exercise price of $48.97 according to the filing. He can do so by achieving pairs of goals, with half tied to SolarCity�s stock price and half tied to operational goals such as increasing customers, and lowering the cost of generating solar wattage. Every time he achieves a pair, he earns one-tenth of the options.
...Rive hasn�t yet earned any of his options, according to SolarCity�s proxy. While the company has achieved two operational goals, it needs to bring its stock price to $84.07 before he earns one-tenth of the options. SolarCity closed at $33.87 on Thursday. Rive will only receive all the options if he achieves all operational goals and the company rises to $400 per share."�
1/1/2015
guest Earth Day: We're not doomed (Opinion) - CNN.com
Happy Earth Day.�
1/1/2015
guest Bloomberg and CNBC guests keep touting US high yield as the place to be right now. I know nothing of finance, but I interpret this to mean the return vs real risk is very high relative to things like treasuries or whatever. SCTY ABS offerings fall into this category, no? Therefore if all else remains the same we could expect to see ABS costs drift slightly downward as the market adjusts?
Basically, I'm taking this as a sign that everyone saw inflated cost in Jan/Feb and we should see costs moderate in the next few ABS offerings. Is that rational?
Sounds like there should be a LOT of ABS coming down the line, so I'd like to set a level of expectation in my mind before the costs are announced.�
1/1/2015
guest Glad to know some journalist read my post.�
1/1/2015
guest I'm excited about Tesla's new pricing for Powerpacks, $47k or $470/kWh. This is comparable to the $3000 price on a 6.4 kWh Powerwall. We'll have to wait and see if the Powerwall price stick as they may change that too.
My hope is that both Powerpack and Powerwalls will be priced at the same $/kWh. I believe such pricing avoids giving utilities a clear scale advantage over residents who own Powerwall. Utilities will be more motivated to innovate around aggregated storage if there is not a significant price difference per kWh. So this would be really good for SolarCity.
I think it may be more strategic for Tesla to favor Powerwalls over Powerpacks. The more residential ratepayers have Powerwall, the more it forces utilities to buy into Powerpacks as well. Some utilities may want to drag their feet and keep building out peak power plants. But when solar owners are fully armed with Powerwall, it shifts issues on the footdraggers. They either need to get with distributed battery aggregation or buy their own Powerpack, but in either case it become harder to argue for a new gas peaker.
BTW a 1 MW / 2MWh system Tesla prices at $1.2M. So $1.2/W plus installation costs. I think this is still competitive with a gas peaker. Tied with utility solar, the levelized cost is about $200/MWh. Gas peakers have levelized costs in range of $180 to $270 per MWh. But batteries have faster response time and can take surplus load to enable better utilization of baseload capacity. So at a comparable levelized cost batteries are the better value. So Tesla may be pricing Powerpacks low enough to compete with new gas peakers, but not so low as to leave money on the table.�
1/1/2015
guest the commercial sized units will tend to always have a significant discount compared to consumer sized units for a number of reasons, even if the they are both bought by an entity buying bulk.
1 BMS cost is based on series of cells, a 400Volt BMS is the same whether it is for 2kWh, 20kWh, 200kWh or 2MWh (although the burnoff resister will be different)
2 Cooling, the larger the system, the more cunning the cooling system can be deployed, the lower the cost per kWH throughput. (Ie sea container with drip water vs alternatives etc) (this may also only be primarily visible on a lifetime throughput basis)
3 packaging, a pancake packaging is more expensive than a loaf, particularity as it relates to the surface material used.
4 customer 'support' this is the big one, all else being equal 1 customer is cheaper than 1000 customers to support. (and a 1000 customers provides so much room for 'value' adding)
I think the item no. 4 (customer support) is both the largest and most opaque to quantify. My gut feel is that it will account for about 25% of the cost difference between the small vs large packs.
in countries like Japan most of the solar PV is non domestic, ALL those are required to have battery. The supply market is already quite large and scaled for these products�
1/1/2015
guest on the lighter side
Peabody, SunEdison and Chesapeake walked into a bar....�
1/1/2015
guest Into 3 horizontal bars that is...
What about closing the Tesla circle with SolarCity and this new NY utility cooperation deal. If you own a Tesla car AND a SolarCity connection to the grid you can also rent part of your car battery, say after dark or via scheduling your calendar syncing back to the grid as another value add service.�
1/1/2015
guest U.S. Senate Passes Stalled Energy Bill Without Solar NEM Amendment :: Solar Industry
I am pissed off that congress did not stand up for Amendment 3120. Regulatory capture continues to define our political system. Bernie Sanders just earned my vote.�
1/1/2015
guest King Introduces Bill to Promote Personal Energy Independence | Angus King | U.S. Senator for Maine
Personal-Energy-Independence should be a right.�
1/1/2015
guest Lets hope Obama can throw some weight around and get this cleaned up with veto threat and ninja-like quiet effectiveness.
http://www.nytimes.com/2016/04/21/opinion/mixed-signals-on-energy.html?&moduleDetail=section-news-2&action=click&contentCollection=Energy%20%26%20Environment%20®ion=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article
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1/1/2015
guest This sucks, lets hope Barry O vetoes. With NY moving forward and many states likely to follow, all SCTY needs is for grandfathering of net metering rates. I'm not an expert, but I think that's absolutely crucial to taking the next step where these ABS offerings can happen more regularly and at a lower cost.�
1/1/2015
guest Can N.Y. solar-electric deal recharge U.S. green-energy effort?
Things to know on a ballot measure to end NV Energy monopoly
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1/1/2015
guest FSLR reports on Wednesday, SCTY next Tuesday. Should be an interesting stretch!�
1/1/2015
guest You're telling me. I'm curious to see what ends up in the Energy Omnibus package regarding NEM since it seems like the country is paying attention to the election politics and not this legislation.
Apparently there are some unexpected new features to these new Silevo designed panels.
D.C. Public Housing Buildings Will Get Solar Panels as Part of Sustainability Project
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1/1/2015
guest Was there any news bringing SCTY down today?�
1/1/2015
guest Bloomberg: "YINGLI aims for 2017 start of 6GW solar cell project". (Stock ticker YGE?)
Currently, largest solar cell plant in world is listed at 0.85GW in Wikipedia. But that doesn't mean much: there's so much planned for installation right now, that what is planned vs. what is installed is totally lopsided, and so far, most of the plans I've seen have fallen through.�
1/1/2015
guest Ooh, good article. I find this telling, and relevant to my pro-long-term-Tesla stance regarding morality and war, making USA more solvent by not having to spend as much on war:
So, in other words, reducing dirty energy use (primarily oil with respect to Saudi Arabia) not only removes the heavy hand of demand to those states (which has caused a lot of war) but also brings in industry that isn't as comfortable with dirty morality. Tesla benefits the world in many ways, including clean air, clean morality, and solvency for countries that used to spend a lot on dirty morality (I'm thinking USA mostly). These effects are found in the high demand for Model 3, since people know, whether consciously or not, that these are intertwined. Unfortunately, I think most of these effects are already baked into the stock price of Tesla, but perhaps a little more happiness from USA government debt toward Tesla is unrealized due to these effects. Probably in a couple of years that might happen, and about a year from now the smart people will see whether it is coming.
What does this have to do with Solar? Well, solar is part of the solution, of course. But, everyone sees that now, and SCTY has stiff competition. Someone with better insight into SCTY can tell me how these interact.�
1/1/2015
guest Investing in 21st century energy infrastructure
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1/1/2015
guest Tesla will install more energy storage with Solarcity in 2016 than the USA installed in 2015
I wonder if the master supply agreement includes special pricing for SolarCity.�
1/1/2015
guest I see potential for good terms. And that's a severe understatement.�
1/1/2015
guest I think sometime early last year Elon said no special terms for SCTY. However they probably will get volume discounts which, given their volume, will give them the best price.
There are a whole set of SEC rules with regards to self-dealing (since Elon owns a substantial amount of both companies) that would be invoked if SCTY gets anything but standard pricing. This would be included in the accounting notes, so something to watch for.�
1/1/2015
guest Right, thanks. So within compliance for related companies, it seems SolarCity could have locked in the $25k for Powerpacks prior to price increase to $47k. It would have been a fair deal at the time it was struck.
As this market gets going, high volume deals could become fairly common. A company like Encor who could use several GWH per year (if they get past the regulatory hoops).�
1/1/2015
guest Very nice price recovery from yesterday. Up 7%.�
1/1/2015
guest Perhaps some are realizing SCTY ? SUNE (er,... SUNEQ)�
1/1/2015
guest I've been into SCTY since the IPO. Seems like every ER, I hold my shares expecting that "maybe this time" the stock price will go up with the ER, but as long as I can remember, it always dips. Thoughts anyone?�
1/1/2015
guest Patience is a virtue.
Patience is bitter but its fruit is sweet.
Patience is the companion of wisdom.
Anyone can hold the helm when the sea is calm.�
1/1/2015
guest Looks like we might see how badly they want a deal for their LNG exports as Obama is still threatening veto if they reduce clean energy funding.
Senate votes to increase wind energy funding
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1/1/2015
guest This is my hope. That ITC extension was absolutely HUGE relative to the meager loss of allowing oil exports. Not a fan of LNG exports, especially since Philadelphia is trying to be the "Energy Hub" for this nonsense, but if it means a meaningful step in the transition to a renewable nation I'm all for it.
What I'm seeing in the bill thus far is insufficient.�
1/1/2015
guest I think there will be one more quarter of post-ER downswing. The current main role of SCTY stock is being a vehicle for price manipulation. "Solar" is still such an unclear concept to the wider consumer/investor that any small jolt can take the sector or a stock sharply downward, yet it holds such obvious growth potential that it will naturally drift up most days. This is prime territory for price manipulation via misinformation and that's what we see right now.
When that changes to a more rational means of valuation is anyone's guess. It could be May 9th, 2016 or as far out as late 2017. Greater regulatory certainty would definitely help people paint a clearer value picture in their minds. It's my opinion that once "the market" chooses to realize SCTY's future revenue streams from booked contracts as fully valid and collectable, it will zoom to a fair valuation very rapidly.
Edit to add: Not to mention that oil is about $6-10 higher than it should be right now. That alone could be the cause of the recent drift-up, and a drop back down for oil could bring major downward pressure for SCTY.�
1/1/2015
guest Compared to this energy hub. Shouldn't SolarCity revise guidance to include some new growth models with upcoming market certainty?
New York City launches Solarize program 350 MW of new distributed solar by 2025
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1/1/2015
guest Funny you should bring up Solarize programs. I actually sat on the phone bitching out a SCTY service rep for about 20 minutes on this about a month or so ago. There's a Solarize going on in the Philly suburbs as well and SolarCity for some reason declined to participate, even at full retail price. This program will see a good 100 installs of semi-early adopters and not one of them will have heard squat directly from SCTY regarding their PPA value proposition.
I was at well-attended community meetings where the Soalrize presenters brought up zero-down PPAs in a transparent manner and folks really perked up at the notion, but the project had no PPA option(SCTY or otherwise) within this particular offering so it was just glossed over in the presentation. Grrrrrrrrr
Horrendous slip-up in my opinion and one of the major downsides of having a sales entity functioning out on an island. SCTY has some kind of online component attached to their ambassador program from community-based initiatives that I assume is trying to simulate Solarize within their world, but that's not gonna fly in the end. People want info presented from an independent 3rd party like a friend, neighbor or non-profit Solarize group.
It'll be interesting to see how SCTY wedges themselves into this Solarize NYC project. Considering how involved they are with NY state, I assume they will have a central role as main PPA option provider. I would HOPE so anyway.�
1/1/2015
guest Anyone have any thoughts about Solar City's chart? The range is getting fairly tight. The only thing that seems to be keeping SolarCity below $35 is the gap from $35 to $56.�
1/1/2015
guest FSLR down 6% after posting what I assume is mediocre earnings. If the past is any indication, perhaps this is a good indication for SCTY's reactions to earnings on May 9. Every quarter these guys seem to move in opposite directions for very rational reasons.�
1/1/2015
guest Excellent analysis of distributed solar grades by state and recommendations for policy changes to encourage greater adoption of rooftop solar. Good read.
http://www.biologicaldiversity.org/programs/population_and_sustainability/energy/pdfs/ThrowingShade.pdf�
1/1/2015
guest Short interest pretty much unchanged from two weeks ago - still 23M.
SolarCity Corporation (SCTY) Short Interest�
1/1/2015
guest Earnings Release and Conference Call Scheduled for May 9�
1/1/2015
guest What Are Analysts� Ratings for SolarCity?
Expectations???�
1/1/2015
guest Wasn't it earlier planned for May 2nd, the day before Tesla's ER? Hmmm....I wonder why they have decided to save it for after Tesla's ER?�
1/1/2015
guest I think the May 2nd date is an estimate that some sites "calculate". If SCTY officially said May 2nd but then moved it to May 9th I agree there could be some backstory.�
1/1/2015
guest I'm hopeful we get some visibility into Tesla Energy products. SolarCity needs to start reporting on how much storage they install, along with cost info.
So there could be disclosures that have significance for Tesla investors as well.�
1/1/2015
guest Seems like there is a large chunk of money for solar plus storage in the defense bill as well.
Republicans blast Pentagon energy programs
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1/1/2015
guest The Latest: Deal between solar firm, utility ends fight
A deal between the nation�s largest solar company and Arizona�s biggest utility means competing measures asking voters about how to treat rooftop solar power are being withdrawn.
The agreement announced late Thursday between SolarCity and Arizona Public Service puts an end to an increasingly public fight pitting the utility against solar companies for now.
The two sides agreed to mediation over how solar customers are paid for the power they produce on their rooftops. Gov. Doug Ducey and lawmakers negotiated with the two sides and the governor�s office will participate in the talks.�
1/1/2015
guest Tesla already announced they expect to generate $44M revenue this year from SolarCity.�
1/1/2015
guest Futurist Ray Kurzweil predicts solar industry dominance in 12 years
Ray is an interesting guy.�
1/1/2015
guest I would like to see SolarCity focus their efforts on improving the looks of residential solar.
After conducting nearly 400 inspections, most seemed as though they were dabbed on to the roof as an afterthought. Only a handful were architecturally beautiful.
The company that builds good looking solar systems will dominate the market.�
1/1/2015
guest Kurzweil has definately been correct before with some "bold" predictions:
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1/1/2015
guest ExxonMobil profits crash to lowest level since 1999
BAHAHAHAHA�
1/1/2015
guest Wow, this is amazing news. Going to spend my morning reading up on the details.
If this arbiter is at all fair, this is an easy "win" for SCTY and solar in general. Seems we are very rapidly bypassing these corrupt PUCs and having deals negotiated directly with the utilities at the behest of legislators and governors.
This is HUGE for SCTY's ability to kick out regular and massive ABS offerings. The more certainty we can build, the cheaper the cost to SCTY. If this can be handled positively in Arizona of all places, then it's the last piece of the puzzle and we can zoom to fair valuation this year with a proper growth premium.
Edit to add: Should jhm start a "Shorting American Utilities" thread? I vote yes.�
1/1/2015
guest Interestingly the Arizona Utility/SolarCity news has yet to find its way to the Yahoo News Stream.
Just things that make me say HHMMM�
1/1/2015
guest I agree with 2027 being the year more than half of electricity is generated from solar. By about 2019, utility solar capacity (cumulative GW installed) could overtake wind capacity. This year we may even see new utility solar exceed new wind installations.
By 2019 we should see all fossil generation enter perpetual decline. I suspect that Coal is already past its global consumption peak.
So I think solar might just gain a little respect by 2020.
PS: I've been trying to figure out when natural gas will peak globally. It's complicated because it depends on how much market share it can take from coal. In 2014, consumption natural gas and coal grew at the same low rate, just 0.4%. I have a hunch that going forward parity pricing will imply that both fuels decline at the same rate, and this would imply 2018 as the peak for natural gas (short of simple volatility).�
1/1/2015
guest I thought this was a great article on many different levels. I again love the spirit in David Crane and hope he can help us move into a more renewable energy society. BUT, for those still not sure about SolarCity as a business, this section right here attempts to answer this imporant question. It reiterates how well thought out the Musk's family goals are. They thought about the solar sector more than a decade ago and it seems are just about the last major player standing. If you listen to Lyndon talk, he knows exactly what to do with the utilities and how the future should be shaped.
A Conversation With David Crane on Getting Fired From NRG and What�s Next for His Energy Plans
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1/1/2015
guest Click here: Save Net Metering
Let�s Give All Californians Access to Rooftop Solar!
Currently, the community you happen to live in determines whether or not you have access to affordable rooftop solar. A bill currently in the state legislature (AB 2339-Irwin/Low) would help solve this by making rooftop solar � and, specifically a critical program called net energy metering- accessible in all communities across the state.
Let�s give millions of Californians real access to rooftop solar�let�s pass AB 2339.
AB 2339 is being considered by the state legislature at a critical time. Many municipal utilities, including Palo Alto, Burbank, Modesto, Imperial and Redding, are threatening to take net energy metering away from their consumers. Net energy metering is the program that makes solar accessible and affordable. Without it, the market dies and along with it the jobs and clean air. Now is not the time to slow down on our commitments to clean energy. Now is not the time to take solar out of the hands of consumers.
The bill is up for vote at the CA State Assembly this week! Send an email to your local assembly member today! Pass AB 2339.�
1/1/2015
guest Gene,
Sent my email.�
1/1/2015
guest Perfect Symmetry on the monthly:
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1/1/2015
guest Classic boob pattern.�
1/1/2015
guest Done. Appreciate the heads-up!�
1/1/2015
guest I'm kind of anticipating the BEARs will attack between now and ER. Just visceral, no data.�
1/1/2015
guest I'm looking for a dip between now and 2Q announcement to grab a chunk of 2018 LEAPs. Absolutely no clue what to expect for a market reaction to next week's call. Just going to sit back and watch long, way out of money call prices for a cheap opportunity.�
1/1/2015
guest Buffett vs. Musk: The clash of old and new energy titans
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1/1/2015
guest DB lowers from the $80s to $62. SCTY down to $29 early going. Nomnomnomnom�
1/1/2015
guest Indication that SolarCity beat expectations? SolarCity site exceeds hiring quotas�
1/1/2015
guest As a part time resident of WA state, been following this for a while
Shout out to these kids and the supporting law team for a creative approach that is getting some legal traction
Kids In Washington State Were Just Handed A Major Climate Victory - ThinkProgress.org
Judge Sides With Kids Suing The Government Over Climate Inaction: �These Kids Can�t Wait��
1/1/2015
guest "Indication that SolarCity beat expectations?"
That headline is a bit misleading. Without reading, one assumes SCTY has hired more workers than required, but this story is actually saying SCTY exceeded the requirements for hiring minorities as a % of the workforce. So it's not saying anything about the size of the workforce, only the demographics of it.�
1/1/2015
guest This should spread to every state in the country. It is a sound legal precedent.�
1/1/2015
guest SolarCity and John Hancock Announce $227 Million Cash Equity Financing
I haven't had time to digest this bit of finance, any comments?�
1/1/2015
guest $3.24 worth of financing for each residential Watt installed sounds pretty good. I wish the SRECs weren't monetized in case their value skyrockets as they likely will in PA.�
1/1/2015
guest And the stock plummets. Borrowing cost?�
1/1/2015
guest Nasdaq is down, oil is down, dollar is down... And it's raining here.�
1/1/2015
guest Update from Assemblymember Mark Stone (I bolded the key part):
Thank you for your strong letter of support regarding Assembly Bill 2339 authored by Assemblymembers Irwin and Low. This bill would define the �aggregate customer peak demand� for the purposes of calculating the net energy metering program limit for electric utilities and would dictate the manner of calculating aggregate customer peak demand.
Under AB 2339, some 40 municipal utility-served districts will be able to offer net metering under far more favorable rules. In January, the California Public Utilities Commission voted to protect net metering for consumers living in investor-owned utility territories around central, coastal and southern California. The bill is regarded as a significant continuation to solar progress in the state.
You will be happy to know that with my support and vote, AB 2339 passed out of the Assembly Committee on Utilities & Commerce on April 19th, returned to the Assembly floor and has been referred to the Committee on Appropriations. Regardless of location, California state customers should have more net metering equal access for rooftop solar. This is potentially achievable by evening out the net metering policies across areas which are being serviced by investor-owned utilities and municipal utilities alike.
You can track the progress of this bill and other legislation here: Search Bills
Thank you again for taking the time to write, and please continue to let me know about this or any other state concern.
Sincerely,
Mark Stone
Assemblymember
Twenty Ninth District?�
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1/1/2015
guest I am having a hard time comparing this deal with the latest ABS.
That ABS (based on info from Kroll) was for 35.6 MWs and raised $49.6mln. That's $1.39/Watt.
This Hancock deal on surface appears much worse. It raised $227mln on 201MWs. That's $1.13/Watt. Even worse this includes SRECs...
Having said that, the Hancock deal has a mix of commercial and residential here. While the ABS was pure residential. Ideally we should see residential in isolation. Using a little bit of algebra I am able to tell that 147MWs off of the 201MWs seem to be residential, which is 73%. However, I can't tell what the amount raised for residential alone is on a per-watt basis (that 3.24 is inclusive of cashflows before the deal, that's not what we are looking for). In any case, the commerical was supposed to have same economics as residential, as promised by Lyndon/management, so maybe it's a moot point anyway.
Yet another way to look at it, the new deal allowed for overall cashflows of 3.24/watt residential (including srecs), while the latest ABS generated $3.13/watt (excluding srecs). Does anyone know if the srec value of 11cents/watt is on par with expectations or if it is too low?�
1/1/2015
guest It's like a drinking game where you replace "cost shifting", "lining their pockets" and what is "only fair" to the hard working people of Arizona and replace them with a threatened monopoly worried only about protecting their dwindling guaranteed profits....and drink.
Inside the deal that averted a net metering ballot showdown in Arizona
�
1/1/2015
guest If my memory is correct (which it usually isn't) doesn't SCTY ER generally happen before TSLA ER? This time it is flipped with SCTY ER after TSLA. If so, might there be something special in TSLA ER in regard to SCTY? We might have some interesting action the week before SCTY ER.�
1/1/2015
guest I should add, the latest ABS was only securitising a portion of the cashflows, while this new Hancock deal sells away almost all of the contracted cashflows. To boot, SolarCity is on the hook to provide all maintenance at it's own cost. This looks like a really bad deal for SolarCity shareholders.
Did solarcity ever provide a figure for Operations & Maintenance (o&m) costs? Looking at last quarter material, I can't find any.�
1/1/2015
guest Can you expand on this a bit? To me, if they're splitting out the residential and theoretically pulling in $3.24/W on the front end, what is my concern if it's from Hancock, a separate tax exuity offering, state up front incentive, cash prepayments, etc?�
1/1/2015
guest I don't see any indication of the portion of payments securitized? How are we comparing that to past ABS offerings?�
1/1/2015
guest Yes, that's a more straightforward way of looking at it. Lets look at it closely:
Cash coming in: +$3.24/W
Cost of the system: -$2.71/W (from Q4 slide deck)
O&M: -$0.02/w/year * 20 years (from analyst day presentation) = -$0.40/W
Profit Margin: $0.13/W or 4%
If you were to amortize other left out costs like R&D, CapeX and other hidden stuff. The margin is effectively negative.
So all that is left for the company (as in, shareholders) is a hope and a prayer that homeowners will renew their leases and that is the cash-flow that is left. and nothing else.
Note, all the math above is based on SolarCity's own numbers. They have proven themselves as masters of accounting gimmickry over time. The reality may be much worse.
All this is when much of the developed world is swimming in negative interest rates and there is abundant money in the financial system. Imagine what will happen as rates rise.
It didn't look this bad in the past when ABS deals came out because nobody knew what amount of cashflows are given out. If you look at the chart in slide-10 of Q4 presentation, you see that the debt financing goes down over time. In other words, the out years are not mortgaged out. Also, looking at Kroll report, it seems like only about 13years of cashflows will go out to ABS investors in an amortizing manner. But in this new Hancock deal it appears that ALL of the contracted cashflows go away (and the default risk is taken up by Hancock). I'm no expert at this, we can leave this comparison aside, but the math above is pretty straight forward, all coming from SolarCity directly.�
1/1/2015
guest --
Per Q42015 Shareholder letter their total install costs were $2.71/W which includes G&A costs of $0.25/W. The Hancock deal was for
As I see it the deal brought in $0.29/W more than total costs per watt, not a huge profit but setting them on the path for cash flow positive if they keep doing deals like this. I assume maintenance is included in G&A which is more than covered by the deal. I'm not sure why you think they are "on the hook" when it is already factored into overall cost per watt.
- The transaction raised $3.00 of financing per watt of solar generation capacity for SolarCity including tax equity investments, upfront rebates and prepayments; a blend of $3.24/watt for residential projects and $2.35/watt for commercial projects.
Edited - oops read a chart wrong. Same conclusion though.�
1/1/2015
guest I don't think O&M is included in G&A. O&M is 2cents/watt/year per analyst day presentation. That translates to 40cents/watt for the contracted portion. Given that G&A is shown as 25cents it can't possibly be under G&A.�
1/1/2015
guest Three issues with this analysis:
1) The O&M shouldn't be 40 cents because that's not the net present cost. You have to discount it for the fact that's in the future, so the current O&M liability per watt is perhaps 20-30 cents.
2) SCTY still owns some of the cash flow. It's a "minority" for the first 20 years and then 99% of any renewal. We don't know how much this "minority" is so we can't do an analysis on the profitability. Your analysis assumes it's 0. My guess is they've retained enough of the cash flow to cover O&M.
3) SCTY's cost per watt is dropping while the value of the system is not. In a year from now they should be able to sell the cash flows for a similar price while incurring costs down around $2.40 or so. Thus even if they are negative they will improve over time. How much is tough to say.�
1/1/2015
guest Mixed up my terms. You are probably right. I am obviously not an accountant. The more I read their quarterly reports the more confused I am.�
1/1/2015
guest Here are some quotes from the analyst day presentation:
"So those $0.22 a watt that the company gets - the system gets, we pay some O&M expenses on that of about $0.02, and so the net value - the net cash coming in from the system is $0.20 a watt."
"So when you layer on the ITC on the Q3 economics on top of the cash flows, you still get the same $0.20 of cash flow to $0.22, less the $0.02 of O&M."
It does look like they are talking in present-value terms (not nominal terms). Seperately, that 22cents includes the comsumer 13cents plus srecs.�
1/1/2015
guest This deal mentions "majority" as the only indication(that I can see) of how much cashflow goes toward Hancock. From your description it does feels like there's a pivot in strategy from "selling off" only the front years of the deal vs all 20, but that could just as easily be an indication of strong investor appetite rather than a concern. A willingness to go out 20 years and take less than 100% of the cut is stronger, no? I'd like to see how much SCTY is holding on to. I think in an ideal world(maybe very soon) they would be gaining most finance through ABS and tax equity. I'd love to see them hold on to potential windfall variable assets like SRECs.
This picture can be painted as a concern or absolutely amazing. All well and good to take the 3Q15 install cost since these are I believe past installs being securitized, however we all know install costs are drifting down toward $2.30/W, not the $2.71 in your calculations. Let's hope Radford has a large role in explaining all this in the earnings call.
These guys are losing money on every install in southeast PA right now, but in 6 months they'll be raking it in when they're up to scale and costs are limited. Hell, even the $2.50/W install cost we're at today includes an absolutely obscene customer acquisition line that will rapidly dwindle to nearly nothing.
Swap out yesterday's numbers for September's and your negligible margin balloons like crazy. Not to mention the amount "financed" is still increasing with each ABS.
Cash coming in: +$3.24/W
Cost of the system: -$2.35/W (revised 2016 goal)
O&M: -$0.02/w/year * 20 years (from analyst day presentation) = -$0.40/W (included in cost)
Profit Margin: $0.89/W or 37.9%�
1/1/2015
guest Question: how did you arrive at the conclusion that O&M is included in the cost? I see no indication of it.�
1/1/2015
guest I ASS-uMEd it since there is no other indication of any other expenses anywhere else. So either it is buried in there somewhere or they are being deceptive as you keep saying.�
1/1/2015
guest I heard it on a Tesla message board.
Sounds like we now don't think it's included? Regardless this is a solar install and solar upkeep, we are all relatively familiar with the past/current/future costs of all components of the equation. I think we can agree that residual value of hardware(Silveo) will more than offset the average O&M costs for the duration. Perhaps not, but if they don't then energy is free and the entire capitalist structure is likely breaking down and I'll have greater concerns. Or perhaps less concerns?�
1/1/2015
guest The circuit breaker should have just tripped. I can't see any good reason for this drop besides perhaps the MM wanting the stock where it was before the last earnings call, this quarter. It either rips above $35, or re-tests $18. This is basically the mid point.�
1/1/2015
guest SBenson just illustrated it perfectly for us. The inputs sitting in all the algorithms right now point to negative profits, therefore every expansion of the business is an even greater negative. If you take everything as a static data point, you'd be nuts to think this model is a good bet. In my mind I can see with relative certainty that costs are rapidly shrinking, income per install is increasing, the vlaue proposition has broad appeal, and marketshare is being maintained. Dominance of the US energy market is more of a certainty every day.
A computer doesn't care about that. What we need to predict is the date when the cost and profit lines pass quietly in the night, because the next morning those algos will go nuts.�
1/1/2015
guest Right, isn't it supposed to trip at 10% drop? Fail.�
1/1/2015
guest (SCTY) - SolarCity's $227M Financing Is A 'Major Catalyst'; Avondale Says Buy The Stock�
1/1/2015
guest Thanks for the link! I have been scouring the internet daily, I havent seen a shred of credible bad news for SCTY. Any thoughts on the steep swing down?�
1/1/2015
guest Admittedly I don't fully understand the financials - I don't think anyone really does - but I'm bullish on where SCTY is headed. I think things will turn positive in a big way later this year or early next.
I sold a 1/4 of my shares at $34 last week expecting the usual post-earnings tank. If the stock keeps dropping between now and then it's going to be hard to hold off buying back in.�
1/1/2015
guest Well, oil looks to be tanking soon...again. I think market sentiment may be turning sour. Earning season puts investors on edge. Dollar getting stronger. Blah, blah, blah.
Regarding this cash equity deal, I expect that it's a good thing. SolarCity has been trying to move in this direction. So this could be a break through for them. We just don't have the details to do the kind analysis that Benson envisions. I suspect this is mostly commercial, and I've never seen good financials on commercial. It's got to be a lot lower cost that residential just to compete in that space. So we'll just have to wait to see what details will be forthcoming, if any.
I am hopeful that SolarCity is cracking the nut on how to grow in the small to medium business segment. It's quite underpenetrated by the whole solar industry.
The main thing that is promising about the cash equity deal is that it maximizes the cash upfront. They main problem with SolarCity's business model was that the cashflow was so excruciatingly slow, an average duration of 15 to 20 years. To have positive cashflow while growing in excess of 40% per year, you need an average duration less than a couple of years. The beauty of a solar installer having a yeildco is selling the assets and getting cash in return. The problem with a yeildco as a subsidiary is that the two entities are still related. A failure in one compromises the other. Just consider the interconnected mess of SunEdison and its two yieldcos. So SolarCity does much better to find totally independent investors to cut cash equity deals.�
1/1/2015
guest Once the model is somewhat "up on plane", then it's just ticking off expansion opportunities as the markets open up. Install costs of <$2.35/W and monetizations of $3.25/W means they can grow as much as they like and this high yield debt will be a non-issue. A few billion dollars in expansion debt means nothing when you're clearing $.90/W on installs, maintaining 35% marketshare, and most importantly.....having zero true competition in the PPA arena. That's the only thing that will allow an entity to clear 30% in solar, total dominance of an entire sector.
I'm sure I'm missing something and they won't have this easy of a time maintaining PPA dominance, but as of now I don't see how anyone can remotely catch up nationwide. At least nit until 2020 at the very earliest. It's just way to complex to expect to snap your fingers and say you're a true PPA competitor.
I think institutional algorithms will actually agree with the sentiment above, but need to see the inputs at those levels first. Fair enough. As long as install costs and installs hit their 2016 projections, we'll see a fair valuation after the election.�
1/1/2015
guest I just sat down and read the entire SolarCity annual report, all 200-some pages of it.
SolarCity's business is banking (more accurately, consumer finance). They lend people money, and then either (a) borrow money to finance that lending, or (b) sell the loans to a third party while acting as servicer. (The fact that the money is lent to buy solar panels makes very little difference to the business model, although it does help fight global warming.) They're trying every structured finance product under the sun, and I read descriptions of at least a dozen in the annual report.
They were clearly losing money on *some* of them, since they deliberately unwound some of the older ones to refinance them, even though it required paying extra fees. They're presumably making money on others.
I can't extract the interest rate spread from the annual report; the accounting is far too convoluted. The interest rate spread is the key factor determining whether a finance business is profitable. It's clear that they make very little money off of direct sales, but I can't work out what their expected return on those is either. (All the evidence is that they are not competitively priced in the direct-sales business in most areas and as a result their main business is financing.)
Because of the overly convoluted accounting, I can't model what the effect of a change in default rate would be. With a financing operation, I want to be able to say "They lend out $1 billion at 5% interest; they finance it by borrowing $1 billion at 3% interest; they can afford a 2% default rate before losing money". With SCTY, I simply can't *tell* from their published documents.
They are even more like a bank in one way: a lot of their financing is much shorter-term than their lending. Solar Bonds for 1 year financing 20-year installs. This is the basic business model of banks, but banks are subject to *bank runs*. SolarCity could collapse due to a short-term refinancing problem even if the underlying business has great interest rate spreads and is highly profitable.
The only possible interest rate spread I've managed to find is 5-year "solar bonds" at 5.75% and MyPower loans at 4.5%. Uh-oh -- that's loss-making.
That's why I'm invested in Tesla, which has quite nearly the most straightforward financial statements of any company I've ever looked at, and I'm not invested in SolarCity, which has some of the most opaque financial statements I've ever seen.
Tesla's risk factors are clear -- can they sell enough cars? Will they manage to have high enough quality or will warranty costs eat up profits? Will they have supply chain restrictions (shortage of lithium or whatever)? Will they manage to get Model 3 out ahead of the competition? Will they solve their communications problems? Are the competitors ever going to make a car which is a serious competitor, and if so, when? Staying on top of the latest information regarding these is easy enough.
There are some financing questions, but Tesla's not very leveraged and nearly all their borrowings are convertibles, which are going to turn into equity. The latest secured loans are at super-low interest rates.
SolarCity's risk factors are also clear -- can they keep rolling over their short-term financing? Can they get financing with a large enough spread over the cost they're charging customers? Can they continue to charge customers so much, given that they're reported to be consistently more expensive than local installers if you're paying cash? Can they compete successfully with local banks in the market for lending money to finance solar panels? Almost all the questions are financing questions and the business is much, much more highly leveraged than Tesla -- which makes sense, since their business is finance. Unfortunately, I think staying on top of information regarding these is much, much harder to do.
I've evaluated banks before, and they're really quite tricky businesses; they have a habit of looking great until they implode. If SolarCity implodes due to financing, Silevo and Zep and the installation business would still be worth some money, but the massive borrow-and-lend operation would overwhelm it, the way GE Capital nearly overwhelmed GE a few years back.
Contrast this statement in the Tesla Motors annual report:
"During the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes."
With over 200 pages of the SolarCity annual report devoted to special purpose entities (albeit many consolidated).
I actually think the Rive brothers are trying to present SolarCity accounting in an honest way, but the result is a completely incomprehensible balance sheet. I'm not saying it's a bad company, I'm saying it's an indecipherable company. I personally would want to dig through a lot more interest rate details of their contracts before I concluded that they had a money-making (or money-losing) business model. If someone has actually got those interest rate details, I'd love to hear them, but I'd understand if you considered it confidential investment information!�
1/1/2015
guest Thanks for your thoughts.
SCTY certainly does a lot of bank type stuff but I think they're more than that. Whether this is true depends on whether they're actually better at installing solar panel systems than anyone else. Anecdotal testimonies say that local installers are cheaper but I don't see how this could be true because SCTY buys in far higher volumes than local installers, they have stuff like Zep hardware to make installation easier and they have crews that install a boatload of solar with techniques that are probably as refined as they can be. I don't see any advantages that make a local installer cheaper other than maybe trying less hard for sales (lower sales costs). I suspect that a lot of the anecdotes saying local installers are cheaper come from mistakes like comparing panel cost per watt vs. the whole system cost per watt, or having one quote include maintenance/warranty while the other does not. I just don't see how a local manufacturer could make money selling systems for a price where SCTY loses money.
Then again, maybe local installers are somehow cheaper. I haven't really looked into it. If local installers are cheaper, then anyone with deep pockets could start selling PPA's and just contract local installers for the system rather than bother getting involved with manufacturing panels, training install staff etc. If this was true though, I think we'd see SCTY getting less vertically integrated rather than more. Why bother expanding capabilities that you aren't good at? Clearly SCTY thinks they have an advantage here because they are pursuing more vertical integration.
In terms of the stock price, if SCTY starts selling all their installs as asset backed securities then the profit margin is the rate they can afford to grow at without sinking deeper in debt. So if they install for $2.50/watt and sell that for $3.25/watt (30% margin) then they can grow at 30% for each cycling period without sinking deeper in debt. We can't full do the math on this yet because we don't have all the numbers, but I doubt they're there yet. In another year or two they might be making 30% margin with a 30% growth rate and then debt will stabilize.�
1/1/2015
guest Lots and lots of people get lower quotes from local installers than from SolarCity. Given what I know about the installation market, I'm certain this is mostly about markup, not about actual cost-of-labor or cost-of-materials. SolarCity is charging higher markups to cover its enormous advertising / marketing / sales costs, and its high overhead due to total geographic coverage, and quite possibly the overhead costs of the complex financing, and so on. There are actually *diseconomies* of scale in being a national installer: there are reasons why there are no national plumbing companies, no national electrician companies, no national construction companies, and so forth.
In markets where there aren't any local installers, SolarCity seems quite well-respected. And there are a surprisingly large number of those. So there's that on the upside.
Ah, but who has deep pockets? Also, if such a person went for national scale, he would probably end up having a bunch of the costs SolarCity has... But in certain local markets I suspect local people with deep pockets *are* doing exactly that. It would be worth looking for.
Banks, however, already have the overhead costs for the financing schemes. They seem averse to PPAs but there's some evidence that traditional loans and leases are gaining market share on PPAs. And the banks have an advantage over SolarCity in those.
Owning a "captive" manufacturer could be highly profitable for SolarCity, but we don't know yet. The panel manufacturing business is *highly* competitive. SolarCity will, when Silevo gets up to speed, be gaining the "manufacturer's margin" in with the "installer's margin"; it's likely that this is better than not being vertically integrated.
Certainly. The trouble is that it is absolutely opaque (a) what their actual installation costs are, (b) what the homeowner's payments actually look like, (b) what they're selling it to the financiers for, and (c) the residual risk retained by SCTY, (d) the residual upside retained by SCTY, and (e) the residual maintenance costs SCTY is on the hook for. This is different in each deal, and I can't extract enough of it from the financial statements to really see what's going on, or to model changes in the business environment.
As examples of changes which are worth modeling: For instance, if SCTY's installation costs remain the same, but competition drives the prices they charge to homeowners down, the amount the investors will pay for new asset-backed securities will drop. Suppose grid electricity prices drop due to massive utility-scale solar installation, and homeowners with old deals find they're paying way more to SCTY than the going rate for power; these old-deal homeowners may decide to default on their panels, or demand renegotiation -- SCTY may be on the hook to give the financiers their guaranteed rate regardless, and how much impact would that have? Suppose interest rates go way up and financiers are demanding higher returns on investment? I'd like to run a number of stress-test scenarios and there just is not enough information available to tell what would happen in these scenarios.
By contrast, I've run all the equivalent scenarios for Tesla, because the information is out there.�
1/1/2015
guest Excellent interview, debate, Q&A with Lydon Rive and President of PG&E:
"The Impact of Policy and Market Forces on Renewable Energy: SIEPR Summit 2016"
�
1/1/2015
guest You have to look at the SCTY value proposition and work backwards.
If their competitive advantage is based on the ability to create a convoluted financing scheme that removes all the hassle and up-front money from the process of "going solar", would they want to hand the blueprint to SUNE? It's 2016, folks like SBenson and institutional investors can take the data available and create their own simplified model that loosely represents the inputs/outputs of the SCTY model to gauge approximate profitability. We know install costs, we know the amounts "financed", we can back out installs from total expense and see how much debt is being built up to expand.
But that's not even the most important part of their product, anyone can finance and banks are now working with local installers to provide a million different near-zero-down products for purchases. What SCTY provides is truly full service solar at a price that's lower than what your utility charges. As we move through this transition period people are going to need a full service energy provider to guide them through the various stages. We are making our won power now, a third party having your back with things like storage solutions will be a vital for keeping costs down.
As for cheaper grid prices.....Utilities are quietly divesting from production in the US just like they did in Germany once distributed solar gained any traction, there is simply no money in fossil production once distributed solar is in place. Does that sound like a scenario where grid rates will ever go down? Once an open market is created a few years down the line, solar homeowners will likely see some insanely cheap juice on offer from the new grid, but with transmission charges that's unlikely to be a compelling purchase options. Especially since they'll have all the juice they want at the very same time.
SCTY can and will be able to charge a massive premium to local installers because they provide considerably more value than simply installed solar panels(Keeping in mind that SCTY installs at a loss in newer markets like southeast PA). With the trajectory of installation costs and the rapid spread of solar knowledge throughout the customer base, this will all shake out in a matter of a few quarters. The PPA model will either remain compelling or will be trimmed by super low cost installs, that's for the individual investor to decide. I see the market as 50/50 PPA/purchase today and in the future. As things gets more complex over the next couple years, it may even shift more toward full service PPA.�
1/1/2015
guest These things are being explained in a way that only makes sense to people who would read a Tesla Motors Club SCTY Investors Thread every day. That's not helping.
Take a listen at 57:30 when Lyndon gives his 2 cents about the logic of grids requiring access to distributed storage. He gets his point out, but not in a way that any normal person could easily absorb. Not to mention he positions the role of a homeowner's battery pack as a tool of the utility rather than something they "rent out" to the utility. No emphasis whatsoever on the benefit to the customer, just the system. How does he not see that the average potential customer will find that positioning completely unpalatable?
I know he's the CEO and head architect, but engineers with his type of brain have no place in these conversations. They should be building things, not marketing or explaining these them to the average consumer.�
1/1/2015
guest
Pat Hogan from PG&E is a smooth talker, she is doing good job on avoiding any direct confrontation.
I agree, he needs to figure out what his message is and drive it especially when ignored (as Pat is skillfully doing).�
1/1/2015
guest HUGE volume today @ 7M and down 9%. Has the earnings call info leaked?�
1/1/2015
guest Ah, it's Chanos. LOL!
Amazing that people still listen to this guy.
Chanos Still Short SolarCity, Sees `Financial Trouble' in 2016�
1/1/2015
guest We're down ~ 10% two days in a row. Where's the circuit breaker? In the past one week, we've lost ~ 30% of the share value with no negative news, just overall market being down in May so far.�
1/1/2015
guest To buy now or after the ER is the hardest short term question at this point.�
1/1/2015
guest The drop today was due entirely to Chanos, and broad market weakness. Once the stock broke below an important technical level, the rest of the drop was probably algo selling, and stop losses being triggered.�
1/1/2015
guest 4:30pm EST today Lyndon Rive, and Nancy Pfund spoke at the World Energy Innovation Forum at the Tesla Factory.
World Energy Innovation Forum
Additionally, this was announced a few hours ago.
RESAAS Services Inc. (via Public) / SolarCity Joins the RESAAS Marketplace�
1/1/2015
guest SolarCity Launches Utility and Grid Services
SolarCity now begins to offer the complete package of energy solutions.�
1/1/2015
guest How is the SP not going up because of this?! Bought some near open and now banging head against well because it keeps going down.... Seems like last 5 trading days where it'll just keep slipping *sighs�
1/1/2015
guest Anything below $50 is a bargain, just pick your spots.�
1/1/2015
guest ER should have a positive effect, right?�
1/1/2015
guest cool gif of SolarCity referrals in this article: One reason for rooftop solar�s rapid growth? It�s contagious.�
1/1/2015
guest Can the House and Senate turn two energy bills into one law?
�
1/1/2015
guest Looks the "minority share" of ownership that SCTY retained was 5% over the first 20 years in the recent Hancock deal:
With Jim Chanos Short, Is SolarCity The Next SunEdison? The Full Bear Case | Zero Hedge�
1/1/2015
guest We don't know SCTYs actual performance and even if we did, we don't know how well it will be communicate/interpreted/understood. I think it's probably more likely to go negative and maybe re-test $18 but that's just a WAG.�
1/1/2015
guest LOL....read the comments section, these are the folks voting for a certain toupee'd casino mogul. ZH broke a couple good stories prior to the recession and now just feeds it's simpleton base what they want to hear.
I will reiterate that this level of shorting is necessary if we want to get the kind of price action that TSLA saw in 2013. Once this model is validated by the algos at some point this year, these folks will get squozen at a peak in short interest. I'm predicting early August after the 2Q call.�
1/1/2015
guest I guess I'm just a total socialist when it comes to power. To me, the whole point of a load balancing battery is to serve as a benefit to the grid (to offset the negative of intermittent generation). If the utility thinks it will serve them better for them to control the way in which it balances, I don't have a problem with that. The benefit to me as a customer is less opposition to renewable power and potentially lower prices to everyone for grid power as the utility will have fewer problems with demand peaks and valleys.�
1/1/2015
guest Everything he said was absolutely true, however he needs to be more aware of how he represents this new energy dynamic. Having a battery in your basement and selling juice to the grid via SCTY is a wonderful thing, but it's not being portrayed in a way that's palatable to the average consumer(let alone appealing). Lyndon talks as if he's making a case in front of a utility commission, even when there are cameras rolling and he's talking to reporters. That's not good when we're looking for consumer sentiment to drive policy and tech adoption.
At the 57:30 mark that I noted above he tries to articulate the benefits of a distributed model for smoothing, but it comes out as "You gotta give control of that storage to the grid, you gotta have the utility be able to use that so they can load balance everything..." That is not a consumer-centric portrayal of the new energy dynamic we advocate, it's closer to a sound-bite for a Heritage Foundation attack ad. So the very thing that will set consumers free can be portrayed as shackles if you're not crafting and articulating your message properly.�
1/1/2015
guest One man who knows very little about the SCTY model just moved the stock downward 30%, so I don't think the results of the historically uninspiring 1st quarter will be able to move the needle much. The inputs into the algorithms need to be rosier before attacks like this bounce off the stock and allow it to move higher.
Here's a chart from the Bloomberg Chanos article. This is the data that's in every algorithm right now, that either needs to drift in the other direction or(most importantly) sentiment needs to wake up and realize the value of the SCTY model. If a few comments from Chanos have this much effect, the average analyst is unlikely to finally gain clarity on May 10th. That being said my predictions for price movement have been wrong pretty much every quarter, maybe that's a good sign.
![[?IMG]](https://assets.bwbx.io/images/i9VUGhaxS2t0/v2/-1x-1.jpg)
�
1/1/2015
guest This is getting ridiculous.
Down 10% per day over three days, about 30% down since Monday's close and still no circuit breaker kicking in? Also, no specific bad news recently, just some overall market decline and this Chanos BS this week. Effectively, any actual bad news for this ER is already well priced in.�
1/1/2015
guest So, has SEC also been privatized? (By whom?)�
1/1/2015
guest Trumped, pumped, and dumped�
1/1/2015
guest Makes sense - but already?
Did you all see that clip of Ted Cruz turning his wife's other cheek? It was tweeted by the New York Daily News: https://t.co/m3zu9k5j5J�
1/1/2015
guest Chanos knows what he's doing, if he can get some downward action the algos will do the rest for him as the stock ticks below certain levels. It's absurd the amount of money he made this week on a self-fulfilling set of disinformation, but that's just part of market dynamics.
Waiting for the 2018 calls to get cheap.....�
1/1/2015
guest Saw that yeah
His kids knew what was coming and how to deflect apparently - experience
�
1/1/2015
guest FWIW
a brief note on one of my favorite financial types, Philip Falcone, in the 90's he helped kick start the Iron Ore powerhouse known as FMG.
anyway he had some colourful interaction with the SEC after winning a short squeeze against Goldman Sachs
SEC hits real short squeeze | OtcShortReport Blog
SEC.gov | Philip Falcone and Harbinger Capital Agree to Settlement
something different seems to have with SCTY recently, the interest rate that the Financial companies charged for shorting shares skyrocked, but the interest paid by Financial companies for those same shares did not skyrocket, effectively it seems that the Financial companies this time simply made off like bandits, and weaker shorts transferred their wealth to the stronger shorts. The Longs were mostly on the sidelines for all of this activity (some got a nice 'dividend' but nothing like what they deserved).�
1/1/2015
guest correction - Philip Falcone, in the 00's he helped kick start the Iron Ore powerhouse known as FMG.�
1/1/2015
guest Did analysts and investors forget the only reason SolarCity lowered guidance last quarter was to provide conservative guidance, due to the uncertainty about if the ITC would get renewed? SolarCity emphasized that if the ITC was extended, the guidance would end up being far too conservative.
Although completely unscientific, I've seen 5 SolarCity vehicles in the past week, on the East Coast. I'll take this as a good sign.�
1/1/2015
guest I don't think that is or will be a major concern, it should be easy to crush their projected +18% yoy 1Q install guidance. I would hope so anyway.
The bigger concerns are cash flow, trajectory of costs and ease/cost of finance. It's gonna be interesting for sure, this should be the last wild quarterly call then it's onward and upward.�
1/1/2015
guest SolarCity was very clear that if the ITC was extended, installations in 2016 would be significantly higher than the revised guidance.
Additionally, this has been completely missed by the media. This partnership will significantly reduce customer acquisition costs.
RESAAS Services Inc. (via Public) / SolarCity Joins the RESAAS Marketplace
For more info on RESAAS Services Inc.
http://m.marketwired.com/press-release/resaas-surpasses-300000-verified-real-estate-professionals-cnsx-rss-1974693.htm�
1/1/2015
guest I believe overall 2016 guidance was maintained at 1.25GW installed, but 1Q was revised down to something tiny due to the impact of ITC uncertainty. Did the math when it was announced and I think it penciled out to an 18% increase over installs from 1Q last year.
So in effect....overall guidance was maintained, but pushed back later in the year.�
1/1/2015
guest Correct. However SolarCity emphasized that if the ITC was extended, SolarCity's guidance would almost certainly be far too low. I vaguely recall Lyndon laughing when asked about that, then saying something like they were preparing for the storm, to be full prepared for a scenario where the ITC wasn't extended.�
1/1/2015
guest Nice to see green for the first time in a long while.
The announcement of utility scale solar seems like a positive:
SolarCity Launches Utility and Grid Services (NASDAQ:SCTY)�
1/1/2015
guest All I can say is the stock price has a lot more room to go up, than down.�
1/1/2015
guest What's the deal with the put to call ratio? There looks to be crazy high bias for puts. Thoughts?
There is an 8-10:1 premium for puts. And 100-300% IV. No wonder the stock is acting strange.
Even though I'm still not convinced he's short more than a handful of shares, Chanos is crazy if he doesn't cover today.�
1/1/2015
guest I thought IVs main input is recent stock price volatility? In which case these high numbers are justified, no?�
1/1/2015
guest Sort of. Yahoo published some article saying someone places a large bullish bet. I think the opposite is true and someone might simply be hedging since the June put:call ratio is very high.
Look at the price for $40 calls vs. $20 puts. $40 calls are .30 and $20 puts are $3. This only makes sense if the market is pricing in the probability of a $10 being equal to the probability of a $10 move down.
Or it could simply be that the 30% drop in one week caused by noise from Chanos has caused calls to be irregularly priced, making it possible for Chanos to buy calls and cover his short.�
1/1/2015
guest Not really. That is the historical volatility. IV is the implied volatility, meaning the option premium agreed upon between the buyers and sellers on the date of the transaction reflects the current uncertainty of the market about the likelihood that the stock will be in the money on the expiry date. IOW, the input for the IV is the current option price (hence the name), and is therefore forward-looking.
Edit: I dug up and old post of mine about IV that contains more detail.�
1/1/2015
guest You are quite correct, of course. It is quite possible that they have a supremely profitable financing scheme and have managed to keep it opaque enough that nobody else can clone it. If you're right, then it's a great investment. I am not comfortable say8ing that they're right.
But not the rates.
That's the lack of competitive advantage which I worry about.
So basically you're saying they're going to be able to charge a premium because people are lazy, won't do their homework, and will want a "turnkey" solution. OK; that makes sense. I don't see why that can't be cloned by, well, anyone, including local installers. The financing is harder to clone.
Um.... yes?
I live in New York. Our utilities were already required to divest from production, years ago. All the power plants are "merchant plants". Utility-scale wind and solar can sell into this market with great success, as you might expect.
Transmission charges have already been raised to cover transmission costs where I live. Transmission costs are at 4 cents -- it might go up to 7, maybe, but probably won't go up at all. There's also a flat service charge per month of $15/month for having a grid connection at *all*, and *this* actually is fairly likely to go up.
Add 4 cents for transmission to future utility solar at 4 cents or less, and you have 8 cents/kwh. Good luck beating that with rooftop solar. Rooftop solar has some value due to grid-independence, but it's actually going to be quite tough for rooftop solar to compete with the grid on price.
Now, if you can go completely off grid and cut the monthly "grid access fee", you have a better value proposision. But *here*, to go off grid you need to be able to ride out a snowstorm: SCTY is simply not selling a system which will do off-grid in the Northeast, and has no plans to do so, as far as I can tell.
In territories like NY where the transmission operator has completely divested from generation, I see residential retail-level PPAs dying completely because they will be more expensive than grid power. Perhaps looking at different utility territories is giving us different perspectives. I think of the NY model as being the future, but it's possible that stupidity will reign in other states...
The battery business is another matter entirely; I see the battery business as competing with the cost of *upgrading your electrical service*. Most people's heavy electrical loads don't last long. A big enough battery could be an alternative to upgrading to 400 amp service, and for *that'* a battery is quite competitively priced. But Tesla owns the value in the batteries, not SCTY...�
1/1/2015
guest Service doesn't need to be upgraded for momentary loads. The reason to upgrade service would be a large continuous load such as running two central ACs while charging two EVs.
It is interesting that Tesla Energy has apparently started selling batteries directly to consumers. I didn't expect this approach, and I'm not sure what this change in strategy indicates.�
1/1/2015
guest Maybe momentary is the wrong word. Not long-term.
Been there, done that.
I'm talking *big* short-term loads like the startup of a geothermal pump. It uses rather little power in steady state, but the startup load is massive, and it was blowing my parents' main breaker until they upgraded. There's a surprisingly large number of things like that, often associated with heating and cooling. Many of them are probably reschedulable (which helps with making sure they don't *all happen at once*) but most of them are not actually set up to be rescheduled. Adding a battery is a way to do it which requires less work than replacing all the heating and cooling equipment with "smart" equipment.�
1/1/2015
guest Whether SolarCity's earnings report contains positive or negative data I fully expect it to be spun negatively by the media. To this end Chanos and other shorts will aggressively attack in a full out effort to collapse the share price. I'm not complaining, only solidifying my long term view. Optimism, pessimism, f$&k that, as god is my witness I'm hell bent on seeing this happen......�
1/1/2015
guest I am 90% certain it will plunge yet again. If not for some stupid amateurish Doha panic trades I would have been sitting pretty right now, but I'm out of ammo. I'm going to ride it down into the teens like I always do but I am just as confident things will turn around in the next year or 2. or 3 or 4.�
1/1/2015
guest Joe Stack (Analyst - RBC) said:
And are you willing to provide an update to those initial targets?
Elon Musk (Chairman and CEO) said:
Not yet. Maybe in one or two earning calls from now I think we'll be able to shed more light on that. But yes, as JB was saying, we're going to make sure Tesla Energy is not constrained by vehicle needs. The growth rate of Tesla Energy is, on a [too soft to hear] basis, going to be far greater than the growth rate in cars.
2017 LEAPs?�
1/1/2015
guest Maybe it is just wishful thinking, but Elon mentioned little to nothing at the TSLA ER call last week about Tesla Energy and batteries. Then SCTY ER was moved out a week later than usual. I'm wondering (or hoping) if there will be some positive battery news that has been saved for tonight's er?�
1/1/2015
guest There is no other entity operating in all viable markets who can touch the SCTY value proposition. Their only real PPA competition is slowly dying or has already died. Turns out there were no short cuts.
I would say the truth is a lot closer to the exact opposite, within a couple years anyone will be able to negate all the up front cost components and take tax credits at POS. What they won't be able to insert into a business model is the stability of being the front-runner since the beginning. Thanks to Elon as a spiritual and financial backstop, SCTY isn't going anywhere. Could that be said about other PPA operators? Why would I choose Vivint or SUNE or a local installer over SCTY for my PPA needs? Half the boxes aren't checked with the other guy's offerings.
Standing relatively alone in the PPA marketplace for 2017-18 will be invaluable to future revenue streams.�
1/1/2015
guest SCTY ER: Like Christmas four times a year.
I hope the boys can keep this ship afloat. Since SCTY financial reporting has reached ludicrous mode there may be no where to go.�
1/1/2015
guest Leaving the snippiness aside, I agree with this bit
- "SCTY financial reporting has reached ludicrous mode"
and this bit
- "there may be no where to go".
Regardless of what happens in the ER, anyone having even a passing interest in SCTY should take a close look at Hancock deal and all info around it.
For the longest times, the belief has been that SCTY does make very fat profits, it just so happens the profits are stuck in very long term future cash flows. This is really the basis for a multi-billion dollar valuation.
For the first time ever Hancock deal actually exposes that the long/bull premise is fundamentally flawed. SolarCity doesn't make any profits even after accounting for all of the future contracted cashflows. The stock slide of more than 30% around the Hancock deal announcement is not fluke. It is simply more people realizing what's going on.
The bolded part, I thought would be the circumstance if ITC deal wasn't reached. It's shocking to find that SCTY is in that predicament today.
Chanos' recent comment is "The problem with SolarCity is they�re losing money on every installation". I believe he is actually correct. And I also believe he is doing a full cashflow analysis (of the contracted portions), not just upfront cashflows. Don't brush off Chanos lightly. He is very highly regarded as a financial/accounting genius. He apparently cracked Enron before it imploded. That does take a genius. After all SolarCity is primarily a financial firm with a gazillion SPEs and SPVs. It is sort of a bank, without any banking regulations, and the management going amok with whatever they want.
On the contrary I believe Chanos is getting Tesla wrong. Yes, he may have a point or two with respect to finances. But Tesla's core strength is not financing. It is the product, the technology, the leadership and such. Chanos hasn't built a reputation for himself in analyzing such traits. So I'm not sold on his thesis with respect to Tesla. But I do feel that he got SolarCity right. He will stay short until it goes to low single digits and eventually gets taken private (to save Musk from an embarrassing public bankruptcy).�
1/1/2015
guest Want to add, generally SCTY short-interest goes down when stock goes down (as traders cover at lower prices). But this time around since Hancock deal came out, as stock went down, the short interest went UP. So essentially shorts are emboldened by that new piece of info.
Hancock deal was either a distressed trade because SCTY badly needed money -or- it is what the true value of these cashflows is. Either case, it doesn't bode well for SCTY.�
1/1/2015
guest I'm most interested in reestablishing customer acquisition cost trends. The financial fallout from Arizona has obscured those numbers.
As a solar construction company they have plenty of opportunity to bid jobs. If the PPA decline continues, the question is whether SCTY can morph into a different kind of company.
I don't expect much from today's ER except obfuscation.�
1/1/2015
guest The Hancock deal does shed quite a bit of light on potential profitability. The residential(70%) portion of the offering was essentially financed at $3.24/W after most everything has been sold or otherwise monetized. Installing at $2.60/W including absolutely absurd customer acquisition costs therefore becomes a fairly clear indication of today's profit off each install and what tomorrow will look like. Yes, these guys are installing in a mature California market at scale, but every other market might as well be in it's infancy. The costs to install will only remain so fat until some major markets getup to scale.
The 2016 install cost goal of $2.35/W(mixed I believe) paints a more pleasant picture when overlayed with the revenue/W they've been able to generate within this most recent offering. In basic terms, if you can maintain something like $3.25/W as the output of your model, how is that anything other than an accelerating cash machine as costs quickly plummet from $2.67 to $2/W?
That being said, I agree that this quarter will be nothing more than worsening inputs for the algos and should cause a dip. This pattern has repeated so many times now that the dip might be mostly priced in, who knows. I'll be interested to see how all the new grid/Tesla Energy products are positioned.�
1/1/2015
guest Mule, The $2Bil market cap and $5.4Bil enterprise-value is not based on future profits.
It is very much rooted in the assumption that SC is making big margins "today" AND the assumption that it has already bankrolled piles of these profits with all the installs they made so far in what used to be called Retained Value.
If word gets out adequately that they are not making profits nor they ever made them, the stock will be sub-$5 or worse, they are already insolvent.
A month or two ago, in exchanges with jhm I said, I believe SC is solvent but has liquidity issue. But now it's becoming clear that they may not be solvent at all. This is a far worse realization.�
1/1/2015
guest It'll all work itself out within this calendar year no doubt. Pretty clear to me that if you can generate $3.24/W on residential installs as the #1 player and no one is able to drive down your premiums over the medium term.....you got something pretty sweet.
As long as they maintain their model and differentiation at all cost, they'll make a killing when cost and revenue finally cross paths. Who's going to jump into this market and displace SCTY? Certainly not the no-sales SUNE model or the all-sales Vivint model.
On an install basis they should show a profit this year right? $3.24/W - X = Y provides more than enough room to work and should be pretty clear to investors.�
1/1/2015
guest I may be proven wrong, but I'm very bullish going into earnings. GL everyone.�
1/1/2015
guest Human sentiment will show signs of coming around, but the algos will easily overpower to the downside on increased debt.�
1/1/2015
guest So how long is normal to wait? I thought it'd be up at 1:01pm PST?�
1/1/2015
guest 214MW installed vs much lower guidance +40% y-o-y�
1/1/2015
guest I was wrong, I purchased a truckload of short term calls. /sigh Glad for those of you who called it correctly.�
1/1/2015
guest Lowered 2016 guidance from 1.25GW to 1-1.1GW.
Not sure why this wasn't revised last quarter when 1Q16 was revised downward.�
1/1/2015
guest Sales costs up to $.87/W, that's a LOT and very surprising. Building out these new markets is expensive.
Edit: Pardon me. NINETY-SEVEN cents. Eating the cost of Nevada I assume? Would have liked to see sales cost without the NV shutdown.�
1/1/2015
guest New zero-down loan options from SCTY, 10yr 3%, 20yr 5% with all the tax credit retained by the customer. Might have to peak at that if rates are <$3/W as mentioned on here previously, but I doubt they'll beat out my local installer.�
1/1/2015
guest Looks like I called the sales cost rise a few weeks ago. I guess they're not all on pure commission.
Overall there looks like a lot of positive stuff so the -20% seems a bit surprising. I like to read the ER, guess the move and then check the after hours quote. Until the reduced guidance I thought it was going to be a big move up despite the sales costs.
My take aways are:
- Exceeded 180MW target by a lot but whole year installs will be under 1.25GWh
- Costs up a shocking 19% per watt but due to temporary sales costs spike and should drop fast later this year
- PPA contracts can be sold for $3.24 minimum + SCTY retains ~$.33 worth of extension and 5% ownership to cover maintenance, so they're profitable now.
- In the future contracts will likely be sold for more while costs decline to $2.25 by year end.
- State by state regulations are still a huge unknown
Unless SCTY is tricking me with their complex math, it looks like there is growing evidence their business model works. If they really get close to $2.25/watt costs by years end that seems quite profitable.
I'd like to hear SBenson's take.�
1/1/2015
guest Most important thing from the conference call.
1) SolarCity does not have a cash problem.
2) Once Tesla Energy is fully online, and the Powerwall is being mass produced, Solarcity will resume hyper growth mode.
3) Chanos is wrong.�
1/1/2015
guest The price action is very un-surprising. The slide desk is dense. I only took a cursory look and couldn't tell anything. In good old times there was just one metric to look at - RV and how that is progressing. Now we all know that it was just a lie. oh well, here I go again... In any case, the issue is - as an investor (or a potential investor) I don't even know what to look at or how to validate or value the business model anymore. In every single report Raymond James used to put a phrase like "Valuing SCTY is more of an art than science". It actually slowly progressed into becoming Abstract Art... Just as a pure academic exercise I will spend a day or two on it late this week. Will post if I find anything interesting.�
1/1/2015
guest I could do without the guidance yo-yo'ing.
Feb16: Revise 1Q16 down to 180MW and maintain 2016 at 1.25GW
May16: Install 214MW in 1Q16 and revise 2016 down to 1-1.1GW
What good did the under-guiding 1Q16 do? None. They will easily hit the 1.25GW mark for 2016 and I'm pretty sure they know it. The more guidance transparency the better IMO.
Chanos will continue to be "correct" until he's not. He made a boatload of money, will cover at some point and then dive back in if he feels it's profitable. His commentary on fundamentals means nothing, he's sowing uncertainty and reaping the harvest each quarter. If you can't overcome a little bit of disinformation then either your valuation is fair based on execution or you're not expressing your value proposition properly.
I'll continue to bet on the Musk/solar combo obviously, but timing this thing for profit will continue to be a challenge. 1/3 of install costs are customer acquisition. Eating all the NV costs is a fair excuse, but a change of sales tactic is overdue. I have some thoughts on this, but will save them for next week.�
1/1/2015
guest Wonder if Musk open up his check book again.�
1/1/2015
guest I believe/hope you are absolutely correct. Unfortunately, Chanos is still correct on his short position for today and made crap load of $ right now. Hope he decides to let it ride and give it all back eventually. Either way, he gets to pound his chest and tell the world how credible he is for now... Chanos can have my scty calls that I lost today and suck it..... It's so funny I'm more mad about him making $ on his short scty than me losing 5 figures on my scty call options...�
1/1/2015
guest In my view, if Chanos doesn't cover his short tomorrow he's 100% crazy. The sentiment on TMC has never been more bearish. I'll be shocked if this end down anywhere near the after hours low. All this proves is that too many simple minded investors don't understand SolarCity's long term business strategy.�
1/1/2015
guest Additionally, Chanos is a pathetic and disgusting parasite, who is worse than Donald Trump. He exists to boast on TV, and to cause harm to companies by misrepresenting the truth. If he was struck by lightning tomorrow, I would throw a party.�
1/1/2015
guest Agreed. This week's calls are toast for me, but I'm buying back in... but a little longer term options though, lol.�
1/1/2015
guest Don't be so soft on him.�
1/1/2015
guest There's plenty to fret about this quarter, but install costs continue to drop year over year. A big drop for install costs on the November call would make me feel much better about my 2017/18 calls, we should see it continue to drift down this summer.
Don't worry about sales cost, most everyone is feeling that pinch in the US. 98% of consumers have completely incorrect information in their heads regarding the economic value of solar, all it takes is time to eat away at that. People aren't going to need 30 hours of hand holding to go solar a year from now.
Once logic and connection overpowers the disinformation machine the vast majority of that sales cost disappears. That's about $.60/W that SCTY can mine for profits. Then the gigafactory comes online.... Then these second tier markets get up to scale.....
Interested to see the Elon purchases next week and perhaps hear someone address the weird guidance numbers.�
1/1/2015
guest I despise Chanos, and all that he stands for. That said, today he bested me. Got to give the Devil his due.
But, a big Kim Kardashian But, I'm in for the long haul.
I'll be back.�
1/1/2015
guest I'm right there next to you, except...
But, a big Jay Lo But...
I won't be buying weekly calls for a while though... Just leaps mam, just the leaps...�
1/1/2015
guest I'll gladly take it a step further. If Chanos's gasoline vehicle got into a horrible accident and exploded with him in it, I'd throw an even bigger party. He's a cancer.
If I was a screenwriter, perhaps I would use him as the inspiration for a story about a parasite analyst who wakes up one morning as a giant cockroach. The story would end with the entire city running him out of town. Or perhaps him being hit by a passing freight train while being run out of town? The final scene would be a person in a Tesla driving by the incident and laughing.
Just for fun, this comes to mind. Obviously nothing borrowed from Kafka.
�
1/1/2015
guest I was similarly destroyed. I think I'll be sticking to LEAPS for a while. I am not looking forward to the red in my account from my weeklys once the opening bell rings.�
1/1/2015
guest I'm happy to see that SolarCity is righting the ship. They have made solid progress toward becoming cash positive. They are now monetizing 98% of cost. It was a disappointment to see sales cost climb to $0.97/W. Management believes this is transitory and will be rectified by Q3. So sales cost is about $0.50/W too high. As that is resolved, the monetization level will easily be above 100% and retained value will be a driver of cash.
Further it will be exciting to see grid services evolve. This has the potential to add 15 to 30 percent to existing customer derived revenue. This will substantially change the investment thesis for SolarCity. Full cost monetization moves the company to cash positive growth with long-term retained value. That's workable, but grid services will add near term profits to sweeten the whole deal for investors.
So my outlook is that SolarCity continues to have a few more difficult quarters as these pieces come together. It may be worth accumulating at very low prices through the summer, but early fall buying may be the best timing. No doubt this stock will be very sensitive to the election cycle. So be careful about bidding up the price anytime before election day.�
1/1/2015
guest SCTY drop continues pre-market, 52-week low and even lowest point since IP in sight....Will shorts cover?�
1/1/2015
guest SCTY opens at 1776, very appropriate.�
1/1/2015
guest Agree- this is the early stage of the transition I've been watching to see (disclosure: I have a very small, long stock position in SCTY). The earliest monetization the better from my perspective. They still hyperbole the belief that better monetization prices should come later- I disagree in general. Solar-Storage is a self competing economic over the 20 year term of these contracts. There' nothing but lower prices for contracts of today imo. [Also not a fan of YieldCos for the same reason)- Now that they are making this transition- I'll be accumulating slowly over the next months if they continue this transition- My investment will be inversely proportional to the contracts they hold instead of sell�
1/1/2015
guest Insane volume this morning.�
1/1/2015
guest 666 would be more approriate�
1/1/2015
guest So SCTY is taking its quarterly beating. Look at a one year chart. Same thing happened right after the last two ERs. It is now back to the level it was at in February. If the price holds at this level, it could indicate that things have bottomed out.
I for one am more optimistic about SolarCity today than three months ago. I see that the company is responding to challenges and setting a new course.
Even short-term traders should be able to see the potential for the price to return to the $30s within a few months. Even shorts may want this price to return so that they can short into next ER all over again.�
1/1/2015
guest At some point customer acquisition cost can either drown the organization or destroy the business model from within. Monetizing all the way out to 20 years is an amazing step and a huge positive, but sales cost is going to come down industry-wide some day soon and SCTY needs to be ready for it.
It's all well and good to pay a sales force $.55/W when you have no other choice, but Germans pay about $.02/W in sales cost. Some day very soon local US installers are going to have that level of demand and if SCTY is still quoting prices with $.55/W in sales cost.....well that's just not good. We can't have a scenario where $2/W installs with a 30% credit are being sold to people who would be much happier under a PPA if it were leaner.
I'm sure SCTY has a solution to this and can just eat the sales cost as they wind down their door-to-door model in late 2017, but it worries me. Sales cost(at least as it's included in new pricing) MUST be less than half of the 2015 average in relatively short order. Relative to the work these guys have already done to get the business model where it is today, these concerns may seem minuscule. But these are my concerns.
Anyone have thoughts on price points for 2018 LEAPS? $60's, $70's, $80's, $90's? I just want to put in a $.12 order on something and let it sit a few weeks. $70's at $.12 perhaps?�
1/1/2015
guest This is clearly the number you identify with. You must be delighted today, in your deep and abiding hatred of everything SolarCity. Congrats Mr. 60606 (666) your short position must have paid off handsomely today. Did you close it or are you expecting another 25% drop in short order? What is your prediction for when SCTY goes to zero? 1year? Two months?�
1/1/2015
guest I just got Jan18 20s at 5.25. Kind of feels like stealing.�
1/1/2015
guest Is anyone willing to provide a short summary from the conference call or does anyone have a link to the transcript?�
1/1/2015
guest Completely agree- In fact I don't believe acquisition costs will even take the same form 10 years from now; 'Panels' will be sheets, sub-layered with super-capacitive integrated storage. I'm a fundamental believer that Solar-Storage will enter self-destructive accelerated stages (ala semi-conductor). It will soon (a few years) be it's own (and only) competitor- and unlike fossil based power has virtually no bottom to it's cost. Power will be a near-free commodity in 20 years imo.
The entire profile of the business will modify over that time frame. SCTY will have to be very nimble. I'll stay acutely and cautiously invested.�
1/1/2015
guest I like that buy. On way to play scty is to assume that Musk can only let it get so bad before intervening. One way to look at solarcity strategically is that they will spend a few years right sizing the company. Once they turn cash flow positive it may be possible to put an accurate value on the contracts they hold.�
1/1/2015
guest More SCTY for me this morning at a cheap price�
1/1/2015
guest Averaging down has worked well for many here. Cough.�
1/1/2015
guest Me too, though sadly not that many shares. I helped my girlfriend set up at a brokerage acct so she should profit as well. Now I REALLY need them to do well.�
1/1/2015
guest Bought some shares here, probably from Chanos. Oh well, time will tell.
Thank you kindly.�
1/1/2015
guest I agree that SolarCity absolutely must get a grip on sales cost. Consider that they were just about $10M short of being cash positive (on their metric that allows for project financing). Now consider the impact has sales cost just been $.10/W lower. On 214 MW, that would have saved $21.4M in cash outflows. So $0.97/W on sales cost totally screwed up what could have been an amazing turn around. Had they kept sales cost below just $0.45/W, they would have been cash positive to the tune of about $90M. And with that kind of turn around, we could have seen the share price launch back up.
Long-term, I don't know where sales cost should go. That depends a lot on what competitors are willing to spend to grab market share. But short-term, whatever they can trim off of sales costs will make big difference for cash and share price.�
1/1/2015
guest Edit: Sorry, wrong company
SolarCity (SCTY) Lyndon Rive on Q4 2015 Results - Earnings Call Transcript�
1/1/2015
guest I don't know too much about what their operational plan was for Nevada, but having to drop shovels and walk out was clearly a punch in the financial nuts. Perhaps that was to be a vital piece in the shift to more efficient sales process.
Taking the long view I applaud them for taking the hit and just leaving the state entirely. I some ways I wish more public companies would make such principled decisions that maybe aren't the best thing for stock prices. As an investor waiting for profits.........
So long as they stay on par with local installer's sales costs they are fine, and as of today they are fine. As I've said a bunch of times, that dynamic is going change at some point and when it does it will happen overnight. When the time comes, SCTY better be ready to pivot away from giving sales guys $100k in commissions.�
1/1/2015
guest Buying a ton here. Should clarify, bought a ton at $16.60. It might go lower, but far to many people are comparing SolarCity to SunEdison, and ViventSolar and are failing to mention any of the factors that make SolarCity unique. Even the analysts didn't seem to understand why SolarCity is fundamentally different from other "solar companies". Solacity is more than a solar company! Also, SolarCity has access to close to unlimited capital.
SolarCity isn't borrowing money to burn through cash and doesn't lose money on every PPA. SolarCity is investing the cash it received into solar ASSETS. There is a very low chance that a large number of Salacity customers will default, and there is a very high probability that many of them will renew. Additionally, once battery storage enters the equation, every SolarCity customer will buy one. This will force the utilities to work with SolarCity on net metering, or something like it, that provides reasonable compensation to people with solar for energy. SolarPanel installation offsets utility infrastructure costs.
As Lyndon put it, unless the utilities ignore the existence of Solar, and continue to expand the current infrastructure without calculating for Solar, the utilities are responsible for any added costs to customers. If utilities include solar in the equation, it results in a reduced costs of energy to customers.
Once the Solar Panels have been fully paid for, customers with PPAs can renew at a significantly reduced rate. Almost all the money SolarCity will bring in from these customers will be profit, and SolarCity's margins will be extremely high. This will provide SolarCity will a lot of flexibility when it comes to charging less than the utilities.
100% certain we hear from Lyndon or Elon any day now. Also, the Gigafactory event is in 2-3 weeks. Anyone know the date?�
1/1/2015
guest I bought today at $16.88. There's a good chance there will be more opportunities this low this year, but there could also be some spikes up to $25-$30 that could be an opportunities for profit.�
1/1/2015
guest I'm torn on strategy, but am going to be patient for a couple weeks. LEAP prices are always slow to adjust to these mega-drops in share price. Looking for a dip down to $17-18ish in about 3 weeks if the share price floats back up. Gonna buy my last chunk of 2018 LEAPs and move on to other things for the summer. Been following this waaaay too close for the last 6 months.�
1/1/2015
guest Chanos is a horrible, disgusting, piece of garbage that isn't worthy of anyone' time. He deserves to get eaten by a pack of wolves, pooped out, then fed through a wood chipper. Despicable lying parasite.�
1/1/2015
guest I'm torn short term as well. Chanos will probably be out calling for single digits soon I imagine on the squawk box circuit. Energy bill should progress on Wednesday after they vote down the Iran amendment according to this. With my luck I would buy a strangle and the SP will linger until expiration.
Overnight Energy: Senate Dems block energy, water bill a third time
�
1/1/2015
guest The Jan18 30s @ 3.30 look like a deal right now, they were trading @11 as recently as April 21st�
1/1/2015
guest Today was accumulation, not short covering. Maybe a little short covering, but I'm fairly sure most of it was accumulation. Short covering doesn't usually create a straight line throughout the entire day.
My thoughts, the drop to $18 was due to the "miss". The rest of the drop was panic selling, and margin calls.
1) Liquidity concerns are BS.
2) Chanos is a chad who enjoys receiving credit for misrepresenting facts.
3) Every time Solar City has fallen to ~$17 it has seen plenty of buyers. I'll remind you that many analysts had price targets of $80-$100 6 months ago. The only thing that has changed is the market sentiment, and the price of oil.�
1/1/2015
guest I agree, aside from the last 15 minutes of the day. That definitely looked like covering for that little recovery.�
1/1/2015
guest I have ser
I'm not convinced. Usually flat movement after a very big drop with significant volume indicates accumulation. I think the last 10 minutes was short covering, and traders who were short exiting stage left, after making 30-50% in 3 weeks. Seriously, every headline today was basically saying SolarCity is doomed, and Elon is a liar. Manipulation?
Either SolarCity will go bankrupt or it won't. I trust Elon and Lyndon 10000% more than I trust Chanos.
If SolarCity succeeds, it is worth $100-300 long term. If SolarCity goes bankrupt, SolarCity's assets and portfolio are likely worth $1-2 billion. At $1.5 the market is basically not pricing in anything.
Chanos = The Gary The Rat of financial Analysts
�
1/1/2015
guest But he does provide for good buying opportunities; but your description sounds better�
1/1/2015
guest Not that it matters, but I think we are saying the same thing.
Me: I agree it was accumulation today aside from the last 15 minutes, which looked like short covering.
You: I'm not convinced. It looked like accumulation until the last 10 minutes, which looked like short covering.
Maybe there's just vehement disagreement re: 3:45-3:50PM today?�
1/1/2015
guest I have so many shares and LEAPS... I am hyperventilating for sure. Any chance this sees 90 before Jan of 2018? LOL.
Drinker of Koolaid, you cannot fault Chanos for anything. If SCTY is a real company with a bright future and big profits as so many of us believe, none of this will matter.
If not and he is right... well then he is right.�
1/1/2015
guest I would rather live a single day as Elon Musk, today included, than a lifetime as Jim Chanos.
Traxila, 8 months is a long time, especially the next 8 months. President Clinton and progress at SolarCity's Riverbend project could change the stock's outlook.�
1/1/2015
guest I would say $90 in Jan2018 is a near certainty and up until this quarter I would have said Jan2017 would be 50/50. After this abysmal quarter I'll still say 30/70 for $90 by Jan2017 due to the near lock for Clinton and a more desperate fossil industry forcing Congress into give and take on energy legislation.
"Solar" is going to change a LOT this summer as consumers become more educated.�
1/1/2015
guest ![[?IMG]](http://www.eia.gov/todayinenergy/images/2016.03.01/main.png)
'Solar. Planned utility-scale solar additions total 9.5 GW in 2016, the most of any single energy source. This level of additions is substantially higher than the 3.1 GW of solar added in 2015 and would be more than the total solar installations for the past three years combined (9.4 GW during 2013-15). The top five states where solar capacity is being added are California (3.9 GW), North Carolina (1.1 GW), Nevada (0.9 GW), Texas (0.7 GW), and Georgia (0.7 GW). These values reflect utility-scale solar capacity additions, and do not include any distributed generation (i.e., rooftop solar)'
Kinda cute isn't it, Nevada is now 3rd in the country for solar additions, I wonder why.
on a separate note '3.676 cents per kWh' is the new industry benchmark for California utility solar
http://www.cityofpaloalto.org/civicax/filebank/documents/50920�
1/1/2015
guest If the company goes bankrupt the shares will be worthless. There are a lot of hyper bulls in this thread that also says things that imply limited understanding of the investing world. I know my post will be disliked in this bullish echo chamber and I have said it before here, but I urge anyone reading not to bet the farm on SCTY, it's a risky investment there is no doubt about that. It's a bet on residential solar which is a business model with no guarantee of ever gaining significant traction (it does compete against utility scale which is 1/3rd the price).
Like traxila said let's wind down the comments about Chanos. I know you are angry about losing money but repeatedly talking about how you would be happy if he died, come on now (also are there no mods watching this thread?). Even at this point the bulls in this thread are as bullish as ever, try to be realistic. The growth is slowing down quickly and the costs are rising, even in spite of the massive rise in customer acquisition spending the growth is slowing, this is a huge warning sign. It looks like the low hanging fruit has dried up and their growth is about to peak and turn south, which makes sense as there is a huge difference in viability of residential solar in the US due to both sun hours and regulation.
My point is that it is easy to fall in love with a stock, that is just how the human mind works. Confirmation bias is not our friend when it comes to investing so be careful and don't martingale.�
1/1/2015
guest I have often made the same statement in the TSLA related threads. The temptation of easy money can draw people into short-term trading and options, both of which are extremely dangerous for the retail investor.
I've strongly advised people NOT to invest retirement funds in individual stocks. A mix of stock and bond index-based mutual funds is generally the wisest path for money that will be needed in the future.
Either SCTY succeeds or it doesn't. What has yet to come into play is the effect of Tesla Energy products combined with SolarCity arrays. It is entirely possible that residential solar won't be as big a play as some thought, but that doesn't preclude SolarCity from transitioning its business more to the commercial sector, especially if corporate customers see big savings from a Solar & PowerPack setup. So: stay calm, don't bet the farm, and plan on holding shares for a long time rather than trying to make $ off trades and options.�
1/1/2015
guest The thing with the Powerwall is though that it will only make it more expensive for the customer. The only reason why residential solar is viable right now is that in some states you can just use the grid as a free battery, all you pay for is the electricity from the panels. The only reason for a SCTY customer to get a Powerwall with the solar panels is if the utility starts to demand it because of the loss they are currently taking. If that were to happen SCTY wouldn't be able to compete at all, the current price from SCTY is something like 13 cents/kwh right? If you added a Powerwall to the deal the total price would exceed 20c/kwh, noone would pay that.�
1/1/2015
guest This will be a huge year for solar. Utility solar had declined last year, so there does seem to be a little catch up to do.
It's very exciting to see how low cost of solar is going. Internationally, Dubai has seen a utility scale PPA go for 2.99 c/kWh. Fossil fuels are getting priced out of the market all over the globe.
While I am impressed with utility solar, I remain convinced that distributed solar will play a huge role in the future. As the cost of generation comes down, the costs of transmission and distribution stick out as irreducible. So even with utility solar at 2 c/kWh, why should all grid participants put up with an additional 8 c/kWh for T&D to deliver that power. Properly valuing distributed energy assets can drive that T&D cost down to 4 c/kWh or less. This is the direction the whole system needs to go and it depends on integrating the expertise of distributed installers such as SolarCity.
The difficulty is that the utilities do not really want to embrace this change just yet. They still want an exclusive 10% rent on a system capable of 12 c/kWh average.
But the utilities will have to change. Just by loading up on GWs of solar, the utilities are committing themselves to making changes in how they manage the generation, transmission and distribution of power. They must make investments that integrate solar and wind into the mix. If they don't, then their costs get pushed onto ratepayers and rooftop solar becomes more compelling. If they do make these invesents, then it becomes more difficult to argue that distributed solar imposes incremental costs upon that system while utility solar does not. And finally, those costs are largely T&D costs. SolarCity is offering services to the grid that reduce those costs and the cost of balancing consumption and production.
So it is well and good, if utilities can acquire solar as cheap as 2 c/kWh. What SolarCity is offering are solutions to minimize the cost of distributing solar and other energy wherever it may originate. The first step to minimizing T&D costs is to reduce the distance from generation to consumption. Distributed solar does that. The second step is the minimize the peak load the transmission system must carry and reduce congestion. Distributed batteries help in many ways. The third is to improve stability and reliability while cutting redundancies. The combination of smart inverters, solar and batteries help in this direction. SolarCity is extremely well positioned to offer these solutions from behind-the-meter. Utilities simply are not allowed to do that. Thus, there is regulatory arbitrage to be had by utilities and SolarCity working together, exchanging value they are distinctly positioned to create. Moreover, this is value that distributed solar can create which utility solar cannot. Utility solar can compete on the price of remote wholesale generation, while SolarCity can compete on value created in distribution. These are two very distinct niches, so there is no a priori reason why one would exclude the other.
So longer-term this ecosystem and SolarCity's place in it will take shape, but the friction of present situation obscures this future. SolarCity has had to fight just to find a way into the market. The problem is no with SolarCity's business model; rather it is with a regulatory environment that is rigid and uncompetitive. SolarCity is quite capable of adapting its business to whatever it takes to break in. They are like the weed that finds a crack in the pavement to take root. What is needed is a more open ecosystem, and SolarCity is actually a big part of what is changing the system. They are the weeds that break up the whole parking lot, so that all sorts of new things can take root as well.�
1/1/2015
guest I agree that distributed solar will play a huge role in the future, I come from a state where 25% of residences have rooftop solar. But the cost savings to the grid are basically a mirage, (except for reduction of peak aircon load, which could've been supplied by utility solar anyway). Until a home actually disconnects from the grid, it is adding costs to the grid, one way or another, due to that cost burden, the payment for rooftop solar will be reduced to trend towards either wholesale price of solar or the TOU midday rate (these are effectively closely related, to a large extent (but not complete extent) they are same thing)). Think of solar as an alternate form of energy efficiency, not as a power source itself.
I've bought 2 solar PV systems, one about 8 years ago, one recently. Pre subsidy, the first was around US $5 per watt?, the second was around US $1 per watt. After-subsidy it was much better than that. Solar is great, but to me Solarcity is quite reprehensible when they sell PPA to the asset rich, income poor (ie the elderly), if there is an escalation clause. Its also why I think of SCTY as having a terrible business plan, they have high FICO grade customers, but seriously sub prime backing assets. Overtime, USA retail customers will trend towards what business customers pay, fixed + variable + demand charge. with big blocks of midday solar causing the midday to the cheapest time of day. Its also demonstrates the most probity. (Ie business customers pay that way because it is the most cost defensible way to apportion the electricity bull)
Solar power is co-ordinated by an extraterrestrial energy source called the sun. In the USA $1 of utility solar buys about 3x as much solar energy as a $1 of SCTY solar. Its really quite a simple and somewhat binary proposition.�
1/1/2015
guest look at today's net demand, California ISO - Todays Outlook and consider what would've happened if California had a nice breeze occurring while the sun was shining.
next year solar = this years solar + wind�
1/1/2015
guest I think the goal is to pair 100% of the PV systems with batteries, let the utilities optimize the battery loads in this new era of cooperation...assuming they want to ultimately keep those customers connected to their grids. More home batteries to the party.
Nissan and Eaton develop home energy storage solution
�
1/1/2015
guest I'm looking for another large stock purchase by Elon here. Last time I bought he did so I'm fully expecting him to do the same now�
1/1/2015
guest On May 2nd and 3rd, when SCTY came back down from the mid 30 to 30, I sold Puts with 25 strike and 5/13 expiration. $25 was well below the 200 day, and if I remember right, the 50 day, and at or below the bottom BB. I thought I was safe. I'm glad to see some recovery this morning. I just hope we reclaim $25 soon so I can get out and just stick to TSLA....�
1/1/2015
guest You chastise people for not understanding the investment world, then turn around and deny the reality already playing out in front of us? Residential solar(distributed geneneration) is clearly the future to anyone with a decent understanding of energy markets and human nature. The future of energy is in the consumer's hands, not the utility. From here on out utilities will be.....a utility.�
1/1/2015
guest Senate votes down Iran amendment to energy spending bill
�
1/1/2015
guest Holy crap these are in the money already. That didn't take long. These could be quite valuable in a year or so.�
1/1/2015
guest To me, rooftop solar isn't about supporting a distributed generation business model or trying to get ROI. It's just about the failure of federal policy, state policy, and the utilities to build and offer clean energy solutions. In the absence of those solutions, my only option is to go rooftop solar, which I wouldn't do if I could buy clean energy from the utility.
In the past, I have stated that I like the idea of installing load balancing batteries with rooftop solar as I can understand how the utility doesn't like the idea of having to balance solar with net metering. However, on the other hand, if you think of clean energy as a necessary part of our future, a rooftop solar install can be looked at almost as a subsidy to the utility as the installer is committing 10's of thousands of dollars to install solar capacity that the utility should have been installing for us in the first place. So maybe I shouldn't be so kind (to the utilities) as to expect consumers to pay for their own load balancing.
Anyway, it would be interesting to see a breakdown of reasons for why people install rooftop solar. Might give some insight for investors.�
1/1/2015
guest We're rebounding off the $16.50 low of the post-ER drop (-25%) yesterday after stabilizing. The +13% today looks like a combination of long-term investors scooping up more shares at an attractive price and possible short covering. Shorts would be smart to lock in profits now (I'm looking at you, Chanos), as SCTY is oversold and should not have gone down this low. We were down ~30% the week prior to ER and any bad ER results should've been priced in already (instead of an additional -25% slide).�
1/1/2015
guest Residential solar is still a very small part of the energy mix, and it is only viable if you can use the grid as a free battery there is no way around that. I believe I have written this before in this thread but I might as well write it again as it is pretty simple why residential solar just isn't viable today. The cost of electricity consists of 3 things, the generation of the power itself, balancing the supply and demand and the distribution. The 2 last parts actually make up more than 50% of the total cost and it all adds up to around 12c/kwh today for the utility.
For residential solar to be viable it has to compete against this cost, that is around 12c/kwh. That is simply not possible when generating the power alone from residential solar is the same cost (12c/kwh) as the total cost from utilites. It is true that if you went completely off grid the distributing part of the cost structure would go away, but even talking about this scenario makes no sense unless battery costs fall to something like 1/3rd of todays cost because it would add a huge amount of cost the balancing your production and consumption. Because if you wanted to go off grid you would need a large battery and probably a diesel backup generator for the winter months.
So residential solar under the current model has a cost structure of 12c/kwh for generation + around the same amount for distribution as you need to use the grid for it to work and an even higher cost in balancing the load as solar is more clumpy in output. That means that if everyone were to switch to residential solar tomorrow the cost would end up at least 8c/kwh higher (the added cost of generation), probably more than 10c/kwh higher. The gap to make residential solar viable in a level playing field environment is just massive.�
1/1/2015
guest I talked about Elon buying half jokingly half seriously. We'll see soon enough as he would have to file with the SEC.�
1/1/2015
guest I suggested to my wife (as she handles the stock in the family) to buy when it had dropped to about $21. Not sure if she did or not. I don't see SolarCity going out of business. They could be a good long term investment, IMO. They've got the right pieces in play.�
1/1/2015
guest Just FYI, most companies impose a trading blackout lasting until 2-3 business days following ER. Then the company has 2 business days to file the Form 4 to cover the transaction, so we may not have an answer until Friday or next week.�
1/1/2015
guest The legacy grid was not optimized to integrate intermittent renewables. There is plenty of friction as the system converges to something optimized for renewables. A lot of legacy cost is being shifted to ratepayers, but utilities like to blame the renewables.
In the long run, the grid will be managed around maintaining a suitable state of charge in batteries widely distributed across the grid. So transmission and centralized generation will mostly be about keeping the batteries charged at the lowest cost, rather than real-time supply-demand management as is currently the case. When the grid mostly exists to keep batteries charged at lowest cost capacity requirements are much lower. An analogy here is that of milkmen making daily deliveries of milk before the days of refrigeration. This was an expensive distribution system. Deliveries had to be made daily. But once electric refrigerators became common place, the milkman did not need to come as frequently. Eventually, the whole distribution system disappeared as families could get milk with their weekly groceries and keep it fresh all week. To be sure, electricity is at much higher frequency than milk delivery, but the same principle holds. Storage changes how inventory is managed. It's hard for people to imagine what this grid would look like because it does not yet exist. But try to imagine what the food supply was like before refrigeration. Try to imagine any commodity without the ability to store or stockpile it. Matching real-time production to real-time consumption is very costly. Matching real-time production to what is needed to restock inventory over the next 36 hours allows for huge logistical efficiency gains. Even just 1 hour of system wide storage would radically change the economics of production and delivery. It would pretty much eliminate the need for peaking plants for anything but occasional back-up, not regular daily use. It would substantially compress the spread between daily max and min spot prices.�
1/1/2015
guest -
Case in point: Germany had so much renewable energy on Sunday that it had to pay people to use electricity.
According to this article, last year in Germany the average renewable mix was 33%.�
1/1/2015
guest San Francisco is requiring new homes have solar pre-installed...today. Wait until the costs are roughly the same as any modern appliance like furnace, water heater, air conditioning or having a refrigerator as jhm illustrated above.
Looks like the Energy bill is back on track...plus a picture of Kate.
�
1/1/2015
guest You make some good points, but I think it's an overly pessimistic analysis. First, I think the aspect of self generation and energy safety is perceived as a major benefit of home solar plus storage. Especially in the next decade I believe this will become a standard feature of new homes in many affluent countries. If climate change becomes noticeably more pronounced people with disposable incomes will increasingly choose safety.
Second, solar and wind are going to be the main path to decarbonize. Home solar plus some battery may just need to be close to the cost of utility solar/wind plus transmission. Denmark may be largely decarbonized with nuclear, but most of the world isn't going that route. The process of decarbonization in the U.S will probably continue to provide incentives for home solar, even if the approach isn't entirely rational.�
1/1/2015
guest Yes, and national companies can not profitably install home appliances. This is one of my primary arguments for solarcity as a stupid business model.�
1/1/2015
guest Yes, you've made this point a thousand times. My apologies if I offend, but that's quite a linear outlook on a system that is literally changing by the month. You talk as if the cost variables of today are set in stone yet the whole industry is in it's infancy for 90% of consumers. You talk about cost as if Germans haven't been installing residential solar at $2/W for three years now, we have a full dollar per Watt to shave yet and that just at the cost levels of maybe 2 years ago. At scale, we should be installing at $1.90/W right now with all parties making enough profit. That is certainly more likely to become reality than for the whole country to insist on keeping the entire energy supply on the other side of a meter just to save $.45/W.
Having purely utility-owned energy production is done. Once your energy source turns to something that can't be hoarded this becomes an inescapable reality.
A utility will be just that moving forward....a utility. It's already happened in Germany and multiple states in the US are following their lead. Now community solar at what we consider "utility scale" will certainly seen quite a bit, but it won't be run by a utility. Third party renewable energy companies like SolarCity will run the production operation and the utility can balance the load.
We're breaking up monopolies here and the savings will be massive.�
1/1/2015
guest First of all Denmark doesn't get any power from nuclear, at all. We do get a lot of our power from wind, the highest percentage in the world I believe, and we have the largest wind turbine producer Vestas. You are implying that we need residential solar to move away from fossil fuels but that makes no sense. Utility scale solar is 1/3rd the cost of residential solar, the choice is obvious. While residential solar is more than 50% more expensive than status quo, utility scale solar has become as cheap as fossil fuels, and in some places even cheaper which is why most of new planned production capacity this year is solar. The solution to move away from fossil fuels and save money in the progress is here today and it is utility scale solar and wind.�
1/1/2015
guest I apologize if I offend but you make zero sense. Even at $2/watt residential solar isn't viable as you would still need the grid so the only difference would be the generated electricity would be twice as expensive compared to utility scale solar. Residential solar would have to become cheaper than utility scale for it to make sense, or trashing the grid completely and let everyone handle their own system and this just isn't realistic even 10 years from now (to do cheaper than a grid solution).
It really is simple math and it just doesn't add up in favor of residential solar. But please try to explain how residential solar will become viable using math.�
1/1/2015
guest As noted earlier, math is not always required, so long as the cost is tolerable. Sometimes it comes down to politics and ideologies.
Utility doesn't install solar --> I install my own solar�
1/1/2015
guest Utilities do install solar, more than half the planned capacity additions this year is solar. Utilities chooses the lowest cost solution, pretty sure they are also required to do that. As utility scale solar becomes cheaper and cheaper, the utlities will install more and more.�
1/1/2015
guest I'm not seeing it in my neck of the woods. I need to do more research to try to figure out what's planned in the future, but right now it looks like this:
http://www.kcpl.com/~/media/Images/Kcpl/About_KCPL/Company_Overview/GenerationMix.jpg
Also, lowest cost solution is often not the best metric when choosing solutions that impact people's safety and security.�
![[?IMG]](http://www.kcpl.com/~/media/Images/Kcpl/About_KCPL/Company_Overview/GenerationMix.jpg)
1/1/2015
guest Fun to watch. The forecasted peak demand is about 30 GW. Net demand at 11AM is down to 18GW, a little lower than early morning.
The peak tomorrow is forecasted at 32 GW. So imagine if this ISO had 32 GWh of battery capacity under its influence. The peak of 32 GW (after sundown) could be reduced by 8 GW from storage and the bulk of 32GWh spread out around this peak. So net demand gets capped at 24GW. It seems this would go a long ways towards minimizing the use of peak power plants. Moveover, these batteries can be charged when there is least need for baseload power, so base load or intermediate load plants do not need to ramp down or suffer low demand. This supports the price for baseload and maximizes its utilization. So the whole duck curve problem is resolved with about 1 hour of storage (1 hour times peak demand 32 GW).
So much of our hand wringing is brushed aside once storage gets to the 1 hour scale and beyond. Of course, it will take more than a couple of Gigafactories to build this out globally, but there are plenty of battery makers willing to step up as this market cracks open. But then there are all the legacy issues about what to do with some 8 GW of peaking capacity that only gets used a couple of hours each year if that. The basic answer is that we stop adding new peaking capacity and stop replacing at retirement. It's the same problem facing coal plants. It may take a decade just to build up 1 or 2 hours of storage, so that allows for a decade or so of depreciation. I think in five year's time, we'll have a very different view of how a grid should function, what's needed and what's no longer needed.�
1/1/2015
guest Here's what the German energy picture looked like on Sunday. Ask yourself how the very rational German regulatory bodies will handle this.
Germany had so much renewable energy on Sunday that it had to pay people to use electricity
�
1/1/2015
guest I don't think critics have been completely proven wrong here. I think it's highly likely that we will need a massive infusion of energy storage for everyone to get primarily on solar. However, I am bullish on the future prospects for battery storage, especially with Tesla's work on the Gigafactory. Pumped storage can help in certain places too where the environment allows; any utilities doing that yet?�
1/1/2015
guest I don't view SolarCity as merely installers. If you are talking about their new New York business model they are a solar utility, selling electricity directly to consumers cheaper than the utility. They will be design, manufacture, install, manage and maintain and bill clients in an end to end chain. I think of them as having an agile business model capable of adapting to a chaotic market and scale will benefit their operation with the regulatory clarity they mentioned.�
1/1/2015
guest Holy cow, that's a lot of coal, even for 2013! Keeping the Koch brothers in politics, is this? No wonder you want out of a system you never chose to be a part of.�
1/1/2015
guest This article was posted in another thread, but thought this statement was relevant with the current discussion going on in here right now:
Tesla Supplier Sees `Extreme Growth' Making Utilities Smarter
�
1/1/2015
guest
For this stock to still have upside solarcity needs a competitive advantage. What the barrier to entry in any of solarcity's businesses? The primary reason investment in renewable companies generally suck is the commodity nature of the business. Revenue is easy in business - just buy a lot of gas stations. The hard part is ROI. Good ROI needs IP or other barriers to entry.
Storage will likely be commodity-like too. I don't see why it would be different than making or installing PV.�
1/1/2015
guest Oil and gas are commodities. Yet Exxon is a pretty impressive company and does alright by their investors.�
1/1/2015
guest Electricity generation capacity has a lifetime of something like 40 years, only recently has the transition to solar and wind begun as it is only recently renewables has become competetive on price. The transition to 100% solar and wind won't happen overnight, that is just impossible. It will probably happen in 15-20 years.�
1/1/2015
guest Over the last decade in the US, massive coal capacity has been shut down and largely replaced with natural gas. This trend was already in place by 2013. Natural gas is extremely cheap in the US, ~$2/MMBtu.�
1/1/2015
guest I know, but even here at this historical low price it still translates to 3-4c/kwh I believe, which is comparable to current solar prices in top US locations. Someone in this thread linked to a project in California at something like 3.7c/kwh I believe it was.�
1/1/2015
guest Exxon has created many barriers to entry and also established IP.
I have never worked in solar or similar. Yet today I could sell and install solar systems.
What would be my odds of success if starting a deep water drilling business? Fracking also sounds interesting. I'll start by digging some holes in the backyard. Anyone know what I put in the hole to force oil out?�
1/1/2015
guest Any thoughts on the price action today? Maybe some large buyers (funds, elon?) picking up shares in the morning driving the price up and then a gradual return the more normal boost we'd expect based on oil going up?
We might see morning boosts the next fews mornings if parties are establishing positions.�
1/1/2015
guest Why don't you write some battery aggregation code and go into business as a DER aggregator? That ought to be pretty easy, don't ya think?�
1/1/2015
guest Yes I do, as application programming is my primary technical skill. There are literally hundreds of firms, big and small, in this space. If SCTY has some success in this space it will be due to the right strategy, not their ability to implement tightly defined specifications.
There is an enormous difference in the challenge of implementing DER aggregation compared to something like autonomous car. Not only is DER aggregation straightforward, but doesn't produce defensible IP.
Since I have never fracked or drilled in the arctic, these areas seem like a pretty big deal.�
1/1/2015
guest Fracking and drilling are pretty straight forward, which is why we see everyone fracking today and not just the one or two companies who developed the technology. The barrier to entry isn't the IP, it's the vast capitol requirements, which incidentally are also the biggest challenge for companies like SCTY.�
1/1/2015
guest Is this the end of the centralised energy network?
This is a nice illustration of grid economics. Western Australia is very spread out with lots of remote, sparsely populated areas. Most of the network is unprofitable to operate and the WA government must subsidize the network to the tune of $500 per family (per year, I suspect).
![[?IMG]](http://reneweconomy.com.au/wp-content/uploads/2016/04/sean-mc-goldrick-western-power-developing-a-microgrid-solution-to-support-the-kalbarri-community-in-wa-3-638.jpg)
So the network operator is experimenting with microgrid and thinly connected modular grid concepts. Some communities will be completely islanded.
So it's always been an unprofitable idea to operate a grid here, but distributed generation and storage technologies are bringing to light alternatives that may prove more economical.
This is one reason why it is very important to consider the locational value of distributed energy. Certainly a state like Nevada faces the same challenges as Western Australia. There are lots of remote little communities more than 60 miles from the nearest grocery store. (I've actually visited several of these communities.) Maintaining 60 miles of power lines to serve a dozen families just cannot make economic sense. So NV Energy stands to reduce costs spread out to all customers encouraging solar and batteries and working toward detached or thinly connected microgrid solutions.�
1/1/2015
guest Western Australia is about 2.646 million km�
Nevada is about 286,367 km�, so Nevada is about 10x smaller than WA.
Both have a similar population, Nevada is just marginally more populous
A lot of WA is beyond the electricity grid & a lot of WA is on the edge of the grid, I once lived in a town south of Kalgoorlie, back then the company had its own natural gas turbines, so I doubt that, that town was even connected to the WA power grid back then. For WA, a significant amount of grid defection would reduce grid costs for those remaining.�
1/1/2015
guest I haven't seem much interest by utilities in my area to even think about installing renewable/clean energy. The only effort they have put forth is due to mandates by law, and even the laws have been under attack.
Five years later, Missouri still grappling with renewable law
The sole law in question is the Renewable Energy Standard (RES). Lets take a peek at the Kansas City Power and Light (KCP&L) RES compliance plan for 2016. (note: KCP&L is actually KCP&L Greater Missouri Operations Company and is referred to as "GMO" in the plan)
2.1.2 SOLAR COMPLIANCE
GMO anticipates that the acquisition of Solar Renewable Energy Credits (SRECs),principally from GMO retail customers that have received rebates for solar facility installations, will be sufficient for compliance with the Missouri solar energy requirements for the 2016 to 2018 RES Compliance Plan period. The SRECs will be transferred to GMO from qualified customer-generator�s operational solar electric systems as a condition of receiving the solar rebate, a change institutedwith Missouri House Bill 142 becoming law on August 28, 2013.SRECs produced from these solar electric systems will be transferred to GMO for a period of 10 years.?
Tell me I'm reading this wrong -- but it sounds like KCP&L is using solar installed by 3rd parties to meet their own solar energy requirements. In other words, they are doing nothing, and intend to continue doing nothing for the foreseeable future.
http://psc.mo.gov/CMSInternetData/Electric/Renewable%20Energy/2015%20Reports/2016%20KCPL%20Greater%20Missouri%20Operations%20Renewable%20Energy%20Standard%20Compliance%20Plan%20EO-2016-0283.pdf�
1/1/2015
guest Solar competes at the retail level. Utilities cannot compete without "regulatory capture".
Regulatory capture is a form of government failure that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating.[1] When regulatory capture occurs the interests of firms or political groups are prioritised over the interests of the public, leading to a net loss to society as a whole. Government agencies suffering regulatory capture are called "captured agencies".�
1/1/2015
guest Seems like there are better environments for renewable energy outside Missouri so they import it, which I don't see the problem in, beside of course it being a negative for the Missouri economy.�
1/1/2015
guest Residential solar is wholesale energy production on the roof of someones home as long as they still rely on the grid. Try going off grid and see how the rooftop solar model holds up against the utility rate.�
1/1/2015
guest I doubt it has little to do with the physical environment. It's pretty flat, mostly crop land. Lots of wind and sun. I suspect the political environment is inhibiting renewables.
I would add that Missouri is not a big coal producer, less than 0.04% of total US production. So they are importing coal from other states when they could be creating new jobs within the state to install and maintain wind and solar assets.�
1/1/2015
guest Customers make retail decisions.
When utilities are held accountable for environmental impact we will have a level playing field.�
1/1/2015
guest And when utilities give up state protected monopoly status...�
1/1/2015
guest
Yeah, I don't see anything wrong with refined sugar besides of course that it can rot kid's teeth, lead to obesity and generally just isn't good for a person's health.�
1/1/2015
guest It doesn't matter where the solar energy is produced as long as it is used. You are saying that even if the US had 100% of its electricity covered by solar panels in New Mexico that would be bad. You guys really have it out for the utilities huh.
@Jack
The thing is that utility scale solar fits directly into the current system with the same low cost as we have now. The benefit of no greenhouse gases without the huge added cost of going with residential solar.�
1/1/2015
guest Ask the residents of Ontario, Canada how they feel about what Hydro One has done and is doing.
In principle (and theory) it doesn't matter where the solar energy in produced. In practical it matters very much. So yeah, it's bad for *many* but New Mexico given how the world works today. If we were all one big, happy family then it's a different story. Perhaps those going to Mars will be able to show the rest of us how to live as a cooperative rather than how we tend to live today, until then the ability for individuals to get out from under utilities (not to be forgotten - run by people) is important.�
1/1/2015
guest I would agree that how ever we get to 100% reneweable adoption is the end game, but looking at the long term vision, distributed generation across the US with battery storage looks to be the BEST way once we are mostly on renewable energy. So why not set out for that path from the start?�
1/1/2015
guest Read the Missouri Solar thread in the Energy forum and you will see why it's more expensive there. The hardware is $1.20 everywhere, at scale residential solar is competitive at retail in every region.�
1/1/2015
guest And yet one of the "smartest" businessman of our times Warren Buffet owns a utility that is paying almost a billion dollars to build a fossil fuel plant in the dessert, which would be the ideal place to put in utility solar.�
1/1/2015
guest This fundamentally wrong. You are ignoring the cost of transmission. Presently the transmission grid cannot support moving power from New Mexico to all the other lower 48 states. Huge transmission lines would have to be added just to make this feasible. And all these lines would need to be maintained. Also, transmission losses are around 1% per 100 miles. So 25% percent of this power is lost just transmitting it to the northeast.
Theoretical work has been done to model the possibility of 100% renewable grid for the lower 48 using just transmission and no storage. Theoretically it is possible, but it requires an enormous and costly grid far beyond what currently exists and it requires very careful positioning of wind and solar generation locations.�
1/1/2015
guest So you would rather pay 20c/kwh and have solar panels on your roof than 12c/kwh and have the solar panels somewhere else? I doubt many would agree. And yes ofcourse in the future the total cost for the residential system would go down, but those same cost reductions would make the grid option cheaper (cheaper solar panels and cheaper batteries help both systems). Why would you pay significantly more to have the solar panels on your roof than somewhere else? If you are concerned about power outtages it would be cheaper to get a battery or a diesel generator for that rare occasion.
@giggle
I'm pretty sure Buffet also owns a large stake in one of the largest utility scale solar plants in the US too, he owns a lot of things.�
1/1/2015
guest Look, I didn't say that planting all the solar panels in New Mexico is the cheapest way to manage the grid, I used that example to proof a point that from an environmental standpoint it doesn't matter much where the renewable energy is produced.
I'm not ignoring anything, you are ignoring the fact that transmission is still a cost with residential solar as long as you use the grid. Transmission cost doesn't have to be huge with utility scale plants, in most of the US there are decent locations relatively close. That added cost of perhaps 1 or 2 cents at most doesn't even come close to the added cost of 8 cents / kwh for rooftop solar compared to utility scale.�
1/1/2015
guest From an environmental standpoint it does matter, hugely, where the energy is produced. I have worked with desert tortoise research for years. I can tell you the solar farms in the California desert are decimating wildlife. The land is scraped bare, and huge fences surround the thousands and thousands of destroyed acres. This sickens me. I have a 3500 square foot house and drive my Tesla 1500 miles per month. All of this powered (with reserve) by less than 400 sq ft. of solar on my roof. No dead tortoises, coyotes, bobcats. No transmission lines.
Simply stated; if you use electricity, you have a roof. Use it!�
1/1/2015
guest I'm sure the huge savings with a grid system could improve the environment for wildlife 10 times as much if used efficiently where it matters the most. I would also argue that betting hard on the utility scale solar with grid system would be much better for the environment as it is actually realistic to go away from burning fossil fuels quickly with this system as it is competetive on cost. Very few people would actually choose residential solar today if they had to pay the real price (practically noone was installing panels on their roof 5 years ago when it was much more expensive).�
1/1/2015
guest This is the SolarCity thread, no one is "paying" anything for rooftop solar here. Every SCTY PPA market is priced 10-15% below local grid prices. What's the problem?
Clearly the best solution it to move hassle-free production as close to consumption as possible so long as it lowers cost, is what the consumer wants and retains flexibility for whatever setup the future may hold.
If you told suburban Philadelphia people 5 years ago that they'd be able to sign a contract and have panels on their roof at negative cost with no maintenance they'd say you're nuts. Yet here we are.�
1/1/2015
guest Slightly below current utility price but with an escalator so on average over the contract more expensive than current utility rates.
Yes, as long as it lowers the cost, but it doesn't, residential solar is much more expensive.
I think this is a good time for me to take a break from the thread again before I start insulting peoples intelligence. I have a feeling I will be back at some point.�
1/1/2015
guest One of the issues with buying renewable energy credits under the idea that it doesn't matter where the renewable energy is generated is this: besides the fact that it's just a lazy way to achieve the overall bare minimum, folks on both sides of the environmental argument regularly divide up all the areas of the country by their generating mix, and use that in their arguments. How often does someone chime in to counter those arguments because of the sale of renewable energy credits? Never. So apparently it matters, whether it should or not.�
1/1/2015
guest Actually, the fight is over keeping the monopoly intact for NV Energy and nothing to do with solar technology as the casinos would rather install their own and keep the savings for themselves. Future problem for all "legacy" utilities in full view... I believe.
Las Vegas casinos seek to power their bright lights with renewable energy
�
1/1/2015
guest This is why a 2% escalator will never(in the short term) be an issue. On the first ~10 years of a 20 year contract signed today with SCTY in southeastern PA, you will NEVER see grid prices go down. As the customer(revenue) base is eroded by solar, the fossil/nuclear utility will need to raise rates in order to cover the static overall cost. This is precisely what happened in Germany and will happen in any location where the energy market is regulated in a remotely free and fair manner.
NV Energy will make another $750M in profit this year because solar has been effectively shut out of the market by corrupt regulators. However if solar, or any form of production, were allowed to compete on a level playing field they would make nothing. Their revenue at current rates would be nowhere near enough to cover their costs.
Clearly the US(or at least Nevada) handles this situation very differently that Germany. In Germany the utility can say this sudden loss of revenue is unfair, but the answer from regulators is "tough beans". We needed X amount of production yesterday and today we need Y which is far less than X. The luxurious benefit of being a regulated monopoly is inversely proportional to the horrendous downside of technological advancement.
If we were capable of acting like adults in this country we could sit down and pencil out a fair plan in weeks, but that's how Germans operate not us.�
1/1/2015
guest http://seekingalpha.com/article/3973101-sunpower-growing-dominance-distributed-generation
The author argues that SunPower could rise to challenge SolarCity in the residential solar segment. They are guiding 350 to 450 MW in US residential for 2016. Good to watch.�
1/1/2015
guest Chanos is speaking today at SALT conference. I fully expect him to bash SCTY as usual.
Agenda
Will be interesting to see what he has to say after Q1 ER.
About SALT conference�
1/1/2015
guest He is been busy bashing Cheniere for last 10mins non stop. About its debt, how the LNG spot market is bad etc. etc.
So we know he has nothing to do with clean energy, fossil fuels and such religious debates. He is simply a financial guy. Where he sees mispricing, he goes short and tells the world.
Here is a reference to his Cheniere short from about a week ago:
Chanos Calls Gas Exporter Cheniere `Excessively Expensive Bet'�
1/1/2015
guest I wouldn't expect him to say one word about SCTY, the job is already done for this quarter. He needs the stock price to go back up in order to spread uncertainty next time around.�
1/1/2015
guest The panel is done. He didn't say one word about SCTY.
Mule got into his head and came out with the news already.�
1/1/2015
guest I'm not ignoring anything. The grids of the world have the opportunity to retreat to those high density areas where the grid service is most profitable and spend less money where grid service is marginally unprofitable.
Historically, the legal framework for monopoly utilities was a bargain to assure that service would be extended to areas where it is marginally unprofitable to provide service. The whole idea was to use profitable high density populations to cross-subsidize service to remote populations. This is legal rationale for a monopoly. Without a protected monopoly, natural competition would offer lower rates in high density areas and charge more or neglect low density areas.
This sort of framework very well may have been necessary 100 years ago as governments struggled to assure that whole countries would be electrified. But it is also a framework which has failed to bring electricity even today to about 1.2 billion inhabitants on this planet. Communities that are too poor and too remote have been bypassed by the grids of the world.
But now cost effective distributed energy technologies are opening up new opportunities for the grids and those at the margin. The political bargain that established legal monopolies is no longer needed. Moreover, that legal monopoly status has been perverted to protect the utilities from competition that would allow all participants to enjoy electricity at lower cost. The utilities have been so worried about protecting their revenue stream from competition that they have failed to see many of the opportunities to cut costs using DG technologies. They now have the opportunities to undo the cross-subsidization implied in the monopoly utility model. Remote communities can be better served by microgrids.
Having a microgrid connection is nice for a customer with rooftop solar because they get some back-up service and opportunities to sell surplus power and trade storage capacity. Whether the microgrid is interconnected with a large transmission grid makes little difference and can be determined purely on the economic cost/benefit of building and maintaining that specific interconnection. To say that a rooftop owner must bear the cost of transmission of power to other customers 1000 km away is at best a moral or legal argument for forced cross-subsidization, but it is not an economic one. To be able to trade power with others within 1 km is quite sufficient for the rooftop solar owner to enjoy nearly all the benefits of large grids. Even at the microgrid scale, utility scale solar pricing can be approached. A 1 MW solar system can easily serve a 100 family microgrid without interconnection to a transmission grid. So all these opportunities are becoming available at a local scale. Only urban centers really need centralized, i.e., remote, power generation and transmission, but urban centers have the economic density to make this cost effective.�
1/1/2015
guest Chanos now on Bloomberg TV (live). He is asked about SolarCity and he carefully evades the question and switches the topic. Umm.. wonder why
OT: Interestingly, he says he has been short LendingClub and refuses to say if he has covered yet.�
1/1/2015
guest Senate passes $37.5B energy and water bill after ending Iran fight
�
1/1/2015
guest I've been telling folks that LNG is a bad bet for quite a while. Wind and solar at PPAs around $40/MWh price combined cycle natural gas plants out of the market. With NG at $5/MMBtu, the fuel cost alone is $40/MWh. The cost of liquefying NG in in Texas and shipping to Asia is about $5/MMBtu. So that leaves no room for buying NG in Texas at $2/MMBtu or making a profit on sell in Asia. LNG is only useful as a back-up and peak generation fuel, not for baseload generation.
The first part of this argument also helps explain why almost no new natgas generation capacity is being added in the US this year. According to FERC Energy Infrastructure Update, 16 MW of NG was added this year through March. The balance of 1308 MW of new capacity was all renewable, including 707 MW of wind and 522 MW of utility solar. (Small scale solar is not reported.) Last year at this time 458 MW of gas had been added. So natural gas looks to be falling out of the new capacity market. Natural gas prices really should go back up above $3/MMBtu for gas producers to turn a modest profit. So with wind and solar hammering PPA prices below $40/MWh, there really is no way for new natgas generation to pencil out as baseload in the US. And upcoming batteries kill the economics for gas peakers. So about the only new gas capacity that might make sense is retrofitting an existing coal plant to run on gas instead.
So it actually is quite helpful for shorts to attack LNG. Traditional energy investors are resistant to facing the decline of fossil fuels, and there is huge potential for a lot of capital to get misallocated. This is a key issue for solar and other clean tech stocks. Capital needs to shift from fossils into renewables. This will accelerate renewables.
So I'll keep a watch out for new gas generation capacity. I suspect more gas will be added later in the year, but it will be at a steep decline from last year. In fact, I have the notion that September 2015 will prove to be the peak operating capacity year for gas in the US. Utility solar is supposed to hit something like 12 GW this year, so it will massively blow past wind for a first time. As this comes out it could attract media attention and serve as a catalyst for solar stocks. Wouldn't that be nice for a change?�
1/1/2015
guest Chanos is an infinitely better stock trader than I am to be sure. I need to remember to pay attention the next time he's chiming in on SCTY or even TSLA as he does seem to be correct, regarding the price action at least. I didn't expect this latest dip at all after the ITC extension and Gigafactory producing packs already. I assumed the bright outlook for SolarCity would be quite apparent. I welcome some positive catalyst! I'm also a bit curious to see how popular the end NV Energy monopoly referendum will be.
Things to know on a ballot measure to end NV Energy monopoly�
1/1/2015
guest You don't need to be a great trader to do what Chanos does. You just need to know how to work the media. I'm sure Trump could do a much better job doing this than Chanos.
Anyhoo... the ballot measure is quite interesting. It's curious to see NV Energy so low key about it. I get the impression that they know now that they over stepped their political welcome and are at risk of getting evicted by voters. If they try to fight this, they risk generating controversy and igniting passions against them.�
1/1/2015
guest Sunrun is up 14% aftermarket due to ER. Maybe it will bode well for the solar sector tomorrow.�
1/1/2015
guest [QUOTE="doggusfluffy, post: 1531035, member: 25523"... I'm also a bit curious to see how popular the end NV Energy monopoly referendum will be.....[/QUOTE]
Things to know on a ballot measure to end NV Energy monopoly[/QUOTE]
A market where the energy retailers are separated from T&D which is also separated from energy producers (3 separate independent business) accelerates the end of net metering because the energy retailer only saves on costs avoided in buying the energy from the independent energy producer. Ending a vertical electricity monopoly ends the regulatory capture that net metered residential solar customers enjoy.
Its simple to have multiple energy retailers, in my country there is about a 20% annual churn rate on electricity retailers. But the T&D, that is naturally a monopoly, in the early days of electricity multiple power poles owned by multiple companies would service the same area, and other areas were unserviced. Very cost ineffective, very un egalitarian. Areas with a single provider could be charged extremely excessive rates....
Its a similar problem to rail, physically it is a monopoly, because of the level of co-ordination & interaction.�
1/1/2015
guest Bonds Detail
personally these seem like a bargain to me, guaranteed 20%-25% annual return, unless SCTY goes to zero.
But be aware, BTU, Peabody had similar bargain bonds in the not too distant past too.
The core issue is that as costs of solar decline, the value of solar assets decline. Its real simple. The faster the decline of solar costs, the faster the decline of solar asset value. TOU is coming, even to California. Any home owner with their own solar on their roofs knows the replacement are (a, lower cost & b, greater capacity). Perhaps PV leasees may not care, but people looking to purchase the house, and their financiers do.�
1/1/2015
guest The remarkable reason that solar is going viral in these 10 American cities
This is pretty cool. I like the dynamic graphics.�
1/1/2015
guest Chanos is doing all that he can to destroy Tesla and SolarCity. The goal of these companies is building sustainable energy and transportation to solve the global warming crisis. With malice and forethought he is profiting from the destruction of our children's future.
I hope he rots in hell. Too strong? I think not.�
1/1/2015
guest I've got to object to the idea that the value of a PPA or lease is linked to the value of the solar system. This is not collateral lending like a mortgage, where the borrower has a kind of put option on the value of the collateral in the form of a default. (I work in mortgage finance.) In practice, very few mortgage investors would every default strategically to excise this option even when their home is severely below the remaining balance. Rather, even in the recent housing crisis. Defaults were driven by financial distress, especially the loss of employment, rather than decline in home value. The difference that negative equity makes is that in financial distress the borrower may be unable to find a buyer who will pay more than owed on the home. Hence, lenders will work out short sales and loan modification options. But this stuff does not really apply to a solar lease, loan or PPA.
The key risks for SolarCity are financial distress coupled with decline in the value of the home, not decline in the value of the solar system itself. So basically, it is the next mortgage/home price crisis like we saw 8 years ago that SolarCity needs to worry about. First, SolarCity customers are obligated to pay their lease or loan in full regardless the value of the systems (unless SolarCity fails to keep it in working order). Failure to do this is default and will have serious credit implications for the borrower. So it is extraordinarily unlikely that anyone would strategically default just to get a cheaper solar system. The almost necessary condition for someone to default is financial distress, in which case mortgage payments and other financial obligations are also at risk. A home owner in serious financial distress with positive equity in their home has the sale of their home as recourse. So if the housing market is in fair condition, this way out resolves the problem for SolarCity. The obligation to SolarCity is transfered to the new homeowner or embedded in the purchase price of the home. So the key issue here is home equity inclusive of the value of the solar system. The same would be true if a home owner had financed any other sort of home improvement like a new roof or HVAC system. If there is sufficient equity in the home, the destressed homeowner walks away with cash in pocket and seeks a more affordable living situation. They have their dignity and creditworthiness intact, which is a much better way to start over. So finally, the situation that gives the borrower the fewest option is when their home value has declined such that the have negative equity. At that point options depend on what the mortgage lender is willing to work out. A loan modification would work well for SolarCity because loan modifications make allowance for paying utilities which would include a SolarCity payment. Here the objective of the bank is to determine what the borrow is reasonably capable of paying for total homeownership and adjust the terms of the loan to meet the budget. The budget will include SolarCity payments, so in principle the bank is satified that the borrower has the means to make those payments. When it comes to a short sale or foreclosure, it become more difficult to say where SolarCity stands. In foreclosure, the bank takes possession of the property and is in no obligation to SolarCity. However, SolarCity may have the right to remove the solar system. Thus, whatever value that system may have can be withdrawn from the total value of the home. The bank will understand this and will likely want the system to remain. My guess is that most banks will agree to allow the system to be transfered to the next owner or pay some nominal amount for it when it is sold. A bank may even be willing to assume payments while it is bank owned if there is a need to keep power on in the property, otherwise, the bank will try to minimize all costs to carry. So this is all very messy stuff and very rare.
Keep in mind that some of the major investors in SolarCity are themselves sofisticated mortgage lending banks such as Bank of America. Such institutions are keenly aware of the complexities and risks of home and home equity lending. So personally, I have great confidence that they have the ability to undestand and quantify the credit risk facing SolarCity, risks that they are immediately exposed to by financing SolarCity.
So if you got lost through all that, the key risk is total home value decline coupled with customer financial distress. It's about another boom-bust cycle in housing, not the positive advance of solar. A nice proxy for this real risk, then, would be MBSs (Mortgage Backed Securities). When MBS investors become worried about a mortgage crisis, then it would be time to worry about SolarCity and its ABS instruments.�
1/1/2015
guest That may be a bit strong. But if we are going to invoke divine judgment in the afterlife, perhaps we can invoke divine assistance to move investors and consumers to make the right investments in this life. I remain eternally optimistic. Most people really do want to believe that a better future for this world is possible. Hope matters. The merchants of FUD are just petty pickpockets. They have no hope in this life or the next.�
1/1/2015
guest If you take the variables and twist them until they fit your argument, then yes buying from the utility is cheaper. Perfect logic.
If you sign a contract for electricity 13% cheaper than the grid with a 2% escalator and your grid has an average annual price increase of 4%, well then you're probably in good shape. And that's before solar has even had a chance to destroy the utility's profit scheme, in which case grid prices go up much more than 4%.
Most of the world has accepted this as fact by now and that may be the reason you find yourself repeating the same concept over and over to people who simply believe you are wrong.�
1/1/2015
guest Living well is the best revenge. Let's use these dips to accumulate and burn him eventually when a short squeeze happens.�
1/1/2015
guest I am of the opinion that FUD is a shortcut to investor capitulation(if you can survive the volatility). All investor concerns must be satisfied before major positive sentiment will be showered upon SCTY. All Chanos is doing is forcing SCTY to make that happen. He's drawing a straight line that he and all the rest of us know is not reality, but it's a valid conversation piece. If that's the way he chooses to make his money, then so be it. Nobody likes gonorrhea, but I'm sure it plays a vital role in evolutionary biology.�
1/1/2015
guest This article was from back in March, my apologies if it's been discussed. This just blew my mind and makes be excited to hear the outcome of the
Arizona Study Claims Solar Leasing Companies Can Afford to Make Net Metering Changes
As part of the UNS proceeding, APS recently released the results of a study that seeks to shift the thinking on net metering. The report, conducted by Navigant Consulting, estimates that solar companies earn a 40 percent project return on rooftop solar leases in UNS territory, which undermines claims that rate reform will cripple the industry and kill jobs.
"We conclude that solar TPO [third-party-owned] providers have headroom to adjust to some changes in rate structures while maintaining project returns,� the report states.
Jeff Guldner, senior vice president for public policy at APS, said the report is designed to end the gridlock on solar policy discussions.?
These guys are so stuck in the monopoly mindset they don't even realize consumers can do whatever they like. We are under no obligation to provide zombie profits utility tasks that have become obsolete. A regulated utility is there to perform tasks that cannot be handled efficiently by a marketplace and they are given a nice chunk of profit for the job, end of story.
If this is the logic they're bringing to arbitration it's going to be a delicious victory for solar. I believe it's happening very soon and will only last two weeks.�
1/1/2015
guest Tesla Confirms Details of Powerwall Improvements
2500 units sold.�
1/1/2015
guest Well that is more in line with my comments of appreciation around shorting LNG. That is, shorts can play an important roll in overcoming over-investment in a given company or industry. The over investment in LNG also perpetuates over investment in natural gas and under investment in renewable energy. So I am happy to see short provoke traditional energy investors to recalibrate their expectations of return, but it is best to do this on the basis of facts and sound reasoning. FUD, as I understand it, is emotional manipulation that plays very loose with the facts and often deploys deceptive reasoning. If an investor shorts where there is truly over-investment, that is an economic good, and there is little need to use disingenuous media tactics.
In the case of SolarCity, I do not believe there is any real over investment going on. Still some benefit is derived simply by challenging SolarCity to do a better job articulating their business model and providing meaningful metrics with which to gauge progress. This is important because this industry is fairly novel in how they create value, so transparency and robustness are very important to securing ongoing capital. That is, a poor job in communicating business model and financial results would lead to under investment in this industry, and that under investment would have negative economic impact. Incumbent industries like utilities and oil & gas have the advantage that business models and performance metrics have long been worked out and investors pretty much buy into them at face value. For example, the oil industry measures "demand" in barrels, not dollars. This fosters the illusion that "demand" is still increasing even though aggregate dollar amount that the world is willing to pay for crude is in serious decline. So in a proper economic sense demand is already well into decline. And yet the industry moves along with very unreliable metrics, and investors have great confidence that if "demand" keeps growing at 1.2 mb/d each year, that the price will eventually recover to $80/b or more. So this kind of conventional thinking needs to get shaken up. Where are the shorts harassing oil investors that they're following the wrong business model and using the wrong metrics? Well, I guess I'm doing my part.�
1/1/2015
guest �
1/1/2015
guest Besides the rise of EV's, this could be another big demand driver as water becomes more expensive and scarce.
To Make Fresh Water without Warming the Planet, Countries Eye Solar Power
�
1/1/2015
guest SolarCity recommits to 1,460 Buffalo jobs, but more will be R&D and sales - The Buffalo News
�
1/1/2015
guest nice theory, why are solarcity bonds at 20-25% yield?
the PPA's are bundled and sold off as an asset backed security. whats left is something akin to credit card fiance based upon good FICO scores but no collateral, thus the junk yield rates.
Is this a problem, perhaps yes, perhaps no.
trying to raise capital with a 20%-25% yield is a problem.
there are 2 debts here, the ABSs and the solarcity bonds. The ABS should continue to be mostly OK, but if ABS bonds have even a little bit of hurt, its the solarcity bonds that seem to carry that pain.�
1/1/2015
guest Sounds to me that they don't intend to fully build out the factory. That could be due to 1) Lack of capital 2) Lack of panel performance/value, or 3) A projected oversupply of panels in the next few years.
It seems they have a minimum factory employment number of 500 and have built a story from that number. Of COURSE it's a complicated and confusing story. That is how solacity rolls.�
1/1/2015
guest The bond market often looks at stock prices as a basis to price bonds. The low stock price drives high yield on the convertible bonds. And yes, this is a way that shorts can drive up the cost of capital for target companies.�
1/1/2015
guest Just a thought: how low would SCTY have to go before Elon made a bid to take the whole thingamojang private? Below $10? That would be $1 billion, give or take a few millions. I was kind of disappointed he didn't buy the other day around $16.�
1/1/2015
guest I doubt Musk would take SCTY private for valuation reasons. Musk has said that SCTY's providers of capital want it to be a public company so that it faces increased scrutiny of its books.�
1/1/2015
guest I don't know why Elon would want to buy a(nother?) doomed, failing company with an incoherent and unsustainable business model.
What SolarCity's new portfolio of grid services can do for utilities
�
1/1/2015
guest Hey, this is very cool. I like that they can deploy quickly in areas like SoCal where the gas leak has disrupted gas power generation. They need these opportunities to get beyond the demonstration stage.�
1/1/2015
guest Going after bigger game: Why Jim Chanos is Shorting the Oil Majors | OilPrice.com
I'd prefer to discuss this in the Shorting Oil thread.�
1/1/2015
guest Agreed. Also it's looking like there will be plenty of opportunities from the SunEdison fallout. Chanos shorting oil now is a strange twist but he seems far more market dynamics motivated than ideologically to me...although I doubt he's a SolarCity ambassador today.
Solar bankruptcy forces Palm Springs to change course
�
1/1/2015
guest Who is Jim Heaney and why is he being paid to write BS about Solar City? He's either very stupid or a very weak troll. This article is 100% on target. http://seekingalpha.com/article/3975292-solarcity-pulling-fast-�
1/1/2015
guest Chanos looks to short companies that seem to require additional capital to pay pre-existing 'outgoing payments'
be it SCTY, Shell, Pertrobas, Cheneire, coal stocks, (CNX). Its all the same to him.
He particularly looks for entities with a strong reputation or leadership aura. So again
SCTY, Shell, Cheneire, are all leaders in their fields.
He is also particularly sensitive to a Chinese slowdown, so oil prices, for longer.
Companies he avoids short display the following traits
- Predictable, consistent cash flow
- Defensive and/or defensible business
- Not dependent on superior management
- Low/reasonable valuation
- Margin of safety using many metrics
- Reliable, transparent financial statements
Companies that attract Chanos like a moth to a flame
- Cyclical and/or overly dependent on one product
- Hindsight drives expectations
- Marquis management and/or famous investor(s)
- Appears cheap using management�s metric
- Accounting issues
�
1/1/2015
guest How long have they been working on this facility now?
Why did they only announce these delays for 2017 by 2/2016?
SolarCity delaying Buffalo factory production - The Buffalo News�
1/1/2015
guest
Where will they get the $5 billion??? [/sarcasm] Haha some things never change, huh? The delay receiving manufacturing equipment has been known for some time now. Just because somebody writes an article about it now doesn't mean you just broke some new news.�
1/1/2015
guest Yeah, this SunEdison bankruptcy looks like an opening for SolarCity, particularly C&I.�
1/1/2015
guest TFTF, nice use of big font. Use the crayon font next time for even more impact.�
1/1/2015
guest To be fair I think it's the same font size as the headline, so probably an artifact of cut and paste.
There is a separate article on Elektrek out now about charges of corruption surrounding choice of contractor at Riverbend, finger pointing towards the governor rather than Solarcity, but also talking about delaying the project. Seems like a concerted FUD effort to me. Interesting our old friend TFTF shows up at the same time.�
1/1/2015
guest This new article indeed points to additional/new delays (in addition to the ones reported in February):
Is the SolarCity Gigafactory at risk? State funding on hold as lobbying connections investigated�
1/1/2015
guest Energy Storage 4.0: The Plug-and-Play Grid Is Not That Far Off
�
1/1/2015
guest Is Brian Kolb behind the nonsense getting reported about Solar City? He's the only NY representative who has re-tweeted any of the FUD articles.�
1/1/2015
guest UNSW solar team achieves huge leap in solar cell efficiency
This is pretty impressive, 34.5% cell efficiency for unfocused light, decades ahead of 24% efficiency.
Manufacturing efficiencies are needed to bring it to market, but if this works out, this is a big advance for rooftop solar especially.�
1/1/2015
guest http://www.azleg.gov/legtext/52leg/1r/bills/sb1465p.pdf
apologies for the capitalized below, its just a cut and past from the legislation.
....
2. BE IN AT LEAST TEN-POINT TYPE
....
'THE AGREEMENT MUST ALSO CONTAIN A FULL AND ACCURATE
ESTIMATE OF THE BUYER'S OR LESSEE'S ESTIMATED UTILITY CHARGES DURING THE SAME
PERIOD AS IMPACTED BY POTENTIAL UTILITY RATE CHANGES RANGING FROM A FIVE
PERCENT ANNUAL DECREASE TO A FIVE PERCENT ANNUAL INCREASE FROM CURRENT
UTILITY COSTS. THE COMPARATIVE ESTIMATES MUST BE CALCULATED BASED ON THE
SAME UTILITY RATES'
....�
1/1/2015
guest So electracity, what's your position on SCTY, are you long, short, out entirely. What are your thoughts on the near term prospects?
I sort of fell off this thread after the redesign, and I've only read the last 5 pages or so so far to catch back up. Looking for the cliff notes�
1/1/2015
guest I'm long with leaps and shares. I'm not exactly brilliant though, I rode it all the way down from 36. I've purchased a few more leaps recently.�
1/1/2015
guest I am holding a substantial position, though I do think that the stock is temporarily underpriced.
I am waiting to see SolarCity complete righting the ship. Here are my priorities for what I'd like to see:
I think if SolarCity can achieve these goals it will be well positioned for sane growth. Selling grid services would be the cherry on top.
- Become cash positive. (FCF + ProjectFinancingCF)
- Reduce sales cost/Watt below $0.45/W, achieve total cost below $2.75/W.
- 900 MW installed in 2016.
�
1/1/2015
guest Sure, but you could use the crayon font just for grins.�
1/1/2015
guest From my IB newsfeed:
�
1/1/2015
guest Why isn't SCTY number one? What does MGT have?�
1/1/2015
guest Assembly leader describes SolarCity as �worthwhile project,� likely to get funding - The Buffalo News
�
1/1/2015
guest FWIW, I recently bought 24 of the 265W panels, there are about 276 panels in a 20' container and 588 in a 40' container. http://seweb.azurewebsites.net/Files\Products\PANEL\DATESHEET\DATESHEET--TOPSOLA TSM60-156P.jpg If a small crew can do 2 sites per day, at about 20 panels per sites, then that 40 panels per day, so they can fully deplete a 20' container in 7 work days, or a 40' container in 15 work days.
So the hurdle to get bulk logistic scale (1 x 40' container regularly each month) is within reach of a family business. If the family business has a handful of subbies working for them, they can use a 1 x 40' container regularly each week. If the family business can also supply others, they can use a 1 x 40' container regularly each day.
All the ladies I spoke to at that electrician I recently used seem to have a Nonya accent, it felt all in the family, so to speak, easy to imagine them supplying other electricians also.
What this suggested to me is that small electricians can scale to basically the same cost basis as SCTY, but without the overhead burden of SCTY. Akin to Dell vs IBM in the 90's. I need to think more about this,
It also suggests that productivity of rooftop solar is woeful compared to utility guys who can get a small team to install a sea container of panels in the time it takes a rooftop installer to install a trailer load of panels.
I could go further, but this is starting to feel like initially a gold rush type business, but where long term, the profits trend to be similar to general local, domestic electrician levels.�
1/1/2015
guest More lies?
�
1/1/2015
guest California PUC proposes storage buy to deal with Aliso Canyon gas shortage
�
1/1/2015
guest I wonder who besides Tesla would be in a position to offer sufficient storage in that timeframe.�
1/1/2015
guest SCTY up 5.35% for apparently no reason. Short squeeze ?�
1/1/2015
guest That's what I was thinking.�
1/1/2015
guest I don't think enough shorts are underwater at this price level for a significant squeeze.�
1/1/2015
guest Perhaps Musk could put his 600 million to use before making his quarterly tax payment.�
1/1/2015
guest Man, the literal inventor of the PPA visits the thread, and the SCTY bulls don't even notice.
Are retained earnings now out of fashion? Did you guys move on to a new value proposition for SCTY and I didn't notice?�
1/1/2015
guest Say what?�
1/1/2015
guest I'm also confused by that post.�
1/1/2015
guest Jigar was co-founder and the first CEO of Sunedison (assuming the Jigar above is that Jigar, which is likely) and did/does a lot of the first innovative clean energy financing including PPA.
Since I mostly don't like the effect of PPA on residential solar, I say "burn the witch"
Jigar is good to follow for his clean energy perspectives.�
1/1/2015
guest Sorry to disappoint. I am not Jigar Shah.�
1/1/2015
guest Sorry. But you could substitute. Just criticize utilities a lot.�
1/1/2015
guest Ok, not really Solar City, but since NV Energy's PUC decision put the squeeze on solar in Nevada.
MGM Resorts to leave Nevada Power, pay $86.9M exit fee�
1/1/2015
guest Congrats to the MGM. Great decision. I hope this is the tip of the iceberg.�
1/1/2015
guest That is hugely relevant to SCTY. They may very well replace NV Energy as MGM's energy provider. Bold move, really highlights the hot mess Nevada has become.�
1/1/2015
guest Brand value hypothesis. I buy that for Tesla, but solar panels are perceived differently; they're becoming such a commodity I don't believe SCTY has much brand value. SunPower has some brand value due to their many-year record of "most efficient commercially available panels".
After customers don't need to be "educated" about solar and sales costs drop industry-wide... does SCTY have a cost advantage on installs? I actually can't tell. Maybe, maybe not. Their panels are not currently the cheapest per watt in the industry, though the theory is that the Silevo factory is supposed to change that... but of course it isn't actually running yet. Their racking costs are totally obscured at this point, and I see no way of identifying them any more. They have no known advantages in installation procedure or design (maybe they have an advantage but I don't know of one) and they have a disadvantage in permitting (local installers have an advantage in permitting).
This is where I am. SCTY could be undervalued by a factor of 100 or overvalued by a factor of 100 and I really do not believe that I can tell from the information available to the public.
That tells you where sales costs have to end up. Germany has higher labor costs than the US -- and worse sunlight, so the inherent value of the panels is lower. Arguably the feed-in tarriff made panels more of a "no brainer" there than here, but dropping module prices will make panels a no-brainer here too soon enough. There's absolutely no reason for the US sales costs to be higher than they are in Germany, long term.
Can SCTY compete in that environment?
It's worth remembering that SolarCity is immediately monetizing all its future cash flows. This means they don't have much tangible book value. This is not like Tesla, where the huge factories have an inherent value. Theoretically the Silevo factory will have such value if it ever gets going.
SolarCity is not just a bet on residential solar. Residential solar does compete directly with utility solar, and tends to be more expensive. But residential solar adds the extra value of self-control, ownership, etc., and people pay a premium for that. A huge premium. People want some grid-independence, even if it's not perfect, and will pay a lot for it.
Unfortunately, SolarCity's PPA model *removes* all those benefits; anyone paying the premium for a certain amount of grid-independence does not want a PPA, they want outright ownership. SolarCity seems to be a bet on very specific financing models. I do not think those financing models are sustainable. A residential PPA will turn out to be more expensive than buying your power from a utility solar farm (which is actually pretty close to what I am *already doing*), and contains none of the "I control it myself" features.
The other motivation for the PPAs is monetizing the ITC for those who can't use it directly, but this is a temporary phenomenon driven by the tax code and will become irrelevant in a few years.
When you eliminate the PPAs, I don't think SolarCity has an advantage in the straight-up sales market; it looks like they lose money there, actually.
No, they're not. Obviously they have to advertise numbers below the current local grid price... but those are first-year prices SolarCity includes a 2.9% annual escalator in their PPAs, so it's very likely they'll end up being higher than utility prices within a couple of years. There's no reason to expect utility rates to escalate that fast given the installation of utility-scale solar, and in fact my utility rates haven't gone up in 7 years. You can get a non-escalator PPA but they'll quote you more than the local grid price, as least in the parts of the country with fairly low grid prices (California and Hawaii are another matter).�
1/1/2015
guest We separated generation from distribution in NY over ten years ago. So this is not what happens here. Grid prices have stayed constant, because the grid charges for transmission, and I can buy my generation from whatever utility solar farm I like.
You're describing a situation in PA where *utility solar* has been artificially hobbled by a vertically integrated utility which is cross-subsidizing its old fossil and nuclear plants out of the amounts customers are paying for grid access (transmission & distribution). I think the utility solar lobby is strong enough that this situation is not going to persist, especially since we've already gotten rid of it in several states.
Residential solar will be competing with utility solar.
Now, I think there's a strong and permanent market for "own your own" residential solar, particularly with batteries -- the product being demanded here is grid-independence, resilience against the regular blackouts, a way to say "go to hell" to the utility company. People will pay huge premiums for that, and it can be twice as expensive as utility solar and still sell very well. But SolarCity has no competitive edge in that, at least not yet.
While this is true, a rash of stories of customers who are locked into way-above-market prices for years would certainly put some hurt on SolarCity's reputation and make it hard for them to get new customers.
Yes, customers are likely to continue paying their PPAs -- just like they pay their mortgages -- even if they're underwater. But they'll be *bitter* about it.
Meanwhile, SolarCity has already monetized all those future income streams from the existing PPAs by securitization. So that income is already accounted for and spent. Sure, the investors in the Special Purpose Vehicles backed by the PPAs will get their money from the bitter and angry customers.
But what happens to SolarCity at that point? With a reputation as the "price-gouging" company which saddled all these people with overpriced electricity while promising zero down... do they really get more customers, or do customers go to the competition?
Obviously, if the Silevo factory in Buffalo is churning out solar panels which are significantly cheaper per-watt than all of the competition while being very efficient, none of this will matter. But if it's not, I don't see SolarCity having an advantage in the *highly competitive* solar market.�
1/1/2015
guest MGM Resorts, Wynn planning to leave NV Energy
Both the MGM and Wynn to leave NV Energy.
Industries become disrupted when their business models are disrupted. This could happen much quicker than many expect.�
1/1/2015
guest Who is/are the third party/ies providing them with energy?�
1/1/2015
guest The solar battle on Nevada rooftops
�
1/1/2015
guest So true-
'the grid of the future' is photonic from that big Fusion reactor in the sky
Translation- "the utility needs to adapt"- but it won't�
1/1/2015
guest Exactly. I have yet to see any major vested fossil interest merge into the renewables world in a way that moves them away from the past. Technically the German utilities are now focused on managing the grid and renewables, but they were dragged kicking and screaming and forced into this new dynamic.
NV Energy has proven they will maintain their monopoly position by any means necessary, they are among the least likely to adapt. They will fight this battle to the death and inevitably die.�
1/1/2015
guest Hot new solar cell
I don't read all posts on this thread, but you might be interested in this development at MIT.�
1/1/2015
guest You brought up a lot of interesting questions that I will definitely go back and address in time, but this one is my personal focus. SCTY reported $.91 in sales cost for 1Q......which is absurd. They did get stuck with a lot of stranded expense related to pulling out of Nevada, but they must turn the corner on sales within a year or so IMO. Fortunately this is the same burden on normal installers right now as well.
Once sales cost is mostly stripped and solar is up to scale in major markets, it's all over. $2.20/W costs and $2.45/W prices are right around the corner and then each can drop another $.30 from there with the market at full blast. In that scenario it's really all about service preference because the ITC takes another 30% off the top and we're quickly talking about something very affordable.
Once service is the main deciding factor, why would most people not want the SCTY PPA? I'm mean, I'm owning because I'm wildly interested in every facet of the process(and I'm cheap), but most people just want sustainable energy as an ultra-simplified service at a reasonable price.�
1/1/2015
guest Wow, SCTY up 10%. Is this because of news about the Kuai project going online or some other news that have passed me by???�
1/1/2015
guest I believe its because of ReneSola. Their earnings were significantly better than expected as a result major solar stocks are getting a lift.�
1/1/2015
guest The entire "self-sufficiency" crowd ("to hell with the grid") will want to own. The non-self-sufficiency crowd who are looking strictly at price will buy utility-scale renewables ("inject it into the grid for me") which will be way cheaper than SolarCity PPAs. That's the scenario I see as most likely.
This would restrict SolarCity PPAs to the remaining "non-deregulated" markets where the utility still controls generation and transmission, and lock them completely out of markets like NY where generation is separated from transmission. The trend is to separate generation from transmission.
Convince me that SolarCity has got a way to compete with buying electricity from the nearby solar farm for the "non-self-sufficiency" crowd. Or that they have a competitive advantage over other installers for the "self-sufficiency" crowd (Zep or Silevo could provide that advantage, but none of their numbers are broken out and I see no way to tell whether they have an advantage.) Because I think if SolarCity ends up restricted to the underegulated markets, their addressable market will shrink every year.�
1/1/2015
guest I shouldn't have replied today because I don't have the time and your points are very interesting. I will say this for now....
1) People have an inherent desire to be free from the guy on the other side of the meter and a dollar amount can be applied to that desire. Especially if that dollar amount keeps the consumer below existing costs and requires no effort.
2) Today's cost of "utility solar" over point-of-use solar is being accepted as permanent. $1.75 vs $3.25 will not last much longer plus transmission is not free(and grows as a % as install costs drop). When we're at $2/W residential and $1.50/W utility like Germany, I don't see a real cost difference there once tyranny and transmission costs are added in.�
1/1/2015
guest Actually utility is just above $1/watt, so 1/3rd the cost of residential. I'm sure this small difference will even out in no time though.�
1/1/2015
guest I absolutely agree, but SolarCity just subsitutes themselves as the guy on the other side of the meter.
Interesting point. This would be great for retail-scale solar installers, but again, I'm not sure it benefits SolarCity *in particular*.�
1/1/2015
guest Hard to say what time may bring, but around here "utility-scale renewables" is laughable at best. There is no such thing. If there was, I would buy it. But I can't, because it's like a myth. So I'll go solar myself, happily tied to the grid, and a SolarCity PPA would be fine. Am I arguing against what you are saying? Actually, no, because I still won't buy SolarCity PPA because SolarCity doesn't do business in my state. So SolarCity still loses my business.
How can SolarCity get my business? I don't care that much about ROI. I just care about advancing sustainable energy for the benefit of future generations. Can there be no profit from this? Surely they can find a way. Tesla found a way. Tesla has my business.�
1/1/2015
guest I'm actually a big fan of SolarCity as a *project*.
But remember: Musk will consider it a success if all cars are electric and Tesla goes bankrupt.
Likewise, Rive will consider it a success if there are solar panels on every rooftop and SolarCity goes bankrupt.
This is something investors have to watch out for! Now, I have very specific reasons to believe that Tesla is not going to go bankrupt, largely due to the utter and total lack of competition. I tried to prove the same about SolarCity, but there *is* competition and lots of it.�
1/1/2015
guest drinkerofkoolaid is apparently hacking TMC accounts
There has never been the slightest suggestion by any research organization that the presence of absence of any solar provider affects total solar installs in the slightest. It is a very competitive market. If solarcity was actually differentiated like Tesla it would not be the crap business that it is.�
1/1/2015
guest My uncle was a Republican committeeman in Missouri.
I'm surprised women are allowed to be employed outside the home.�
1/1/2015
guest Sometimes I forget this thread is supposed to focus on SolarCity as an investor discussion. A quick touch on that. My philosophy is that investing in a better future is never a bad investment. Moving to sustainable clean energy will lead to a better future. My research for that is called science. I don't care so much about making money. Money is an imaginary construct. It's deemed only to have value because people say it does. The future, however, is very real. Money is a video game. The future is real life. The video game can't exist with out real life to support it. The video game may be all about wealth, but pull away that facade and you find that the advanced technologies we cultivate and the condition of the planet in the future will be what really dictates the wealth of the people.�
1/1/2015
guest If our main concern is SCTY as the solar leader not making enough profit between now and the point where solar/wind/storage has shifted the entire energy dynamic of the country sustainable.......I think we're going to be OK.�
1/1/2015
guest Watch now: Ralston Live | Jon Wellinghoff 5-23-16 | KNPB Channel 5 Video
Looks like potentially regulatory changes coming in Nevada (and other states)soon. Big net metering reports out now and tomorrow demonstrating 11 value adds to the grid from distributed solar customers.
The multiple new peer reviewed data reports showing a significant benefit to the grid with DG.
Solarcity Press conference tomorrow.�
1/1/2015
guest Networks discover that rooftop solar is no longer the enemy
I like to watch energy developments in Australia because I think they are a few years ahead of the US. This is mostly dictated by the larger price gap between grid power and rooftop solar which led to earlier adoption in Australia. But the utilities have followed a similar play book of responses to distributed solar.
First, there is denial. The utilities see rooftop solar as triffling, but are willing to follow some of the regulatory obligations to accommodate customers with solar. This is the time of easy net metering. Then, solar becomes economical and adoption rates soar. Soon it becomes clear that solar is a threat, and the utilities enter the second phase, anger. Here the utilities lash out against solar and try to undermine it's economics with punitive policies and rates. Utilities in Australia tries every trick in the book a few years before the NEM battles in the US.
Now, utilities in Australia seem to be entering the third stage, bargaining. They recognize that the customer is central. This is an intellectual breakthrough for entities thar never really had to think about what customers want. But a prerequisite for being in the business that customers will choose is respecting that the customer choice is real. This prepares utilities to bargain with customers. Their business models are up in the air because they really do not know what bargain can be struck with customers. Moreover, the anger stage really abused alot of customers, especially first movers and the best informed. Will these customers trust anything the utilities tries to offer them?
But at least in Australia utilities are coming to recognize that they need to put customers first and strike a new deal. The question is whether this comes too late. Have the utilities so abused customer trust with ridiculous and punitive policies that these customers can never be won back? I suspect some have indeed gone too far. For example, in the US, I think NV Energy has done permanent damage to their reputation and customer trust. So this sets the utilities up for the fouth stage, depression. Particularly those utility that have destroyed too much customer trust will find it very hard to strike a new bargain with customers. There abused ratepayers will simply prefer to do business with just about any other company. This is, in fact, a key advantage for players like SolarCity. They have a name and track record that customers can trust. But it will be very hard for many utilities to win back basic trust. So customer response will be cool, and attempts to offer what customers really want will underperform expectations. So the utilities may find themselves in a depression. The new opportunities in the market will largely pass them by. What is left is the final stage, acceptance. They utilities will simply come to accept that they will play a much smaller role in meeting customer's electrical needs. Some may even go out of business.
The key lesson here is that utilities really need to be very careful not to lash out against solar in anger. The reputational damage can be deep and irreversible. Even before the bargaining stage utilities need to put customers first and respect the customer's desire to choose. This means every policy change around accomodating solar needs to be evaluated from a customer viewpoint. Adding punitive fees and cutting net metering needs to be framed in such a way that solar customers know that they are valued customers and are being treated fairly. Anything less than that destroys trust and damages reputation. At a minimum utilities need to do focus group research on solar customers before proposing any rate changes. Any sign that customers are simply biding their time until batteries or other technologies become cheaper should be taken as a serious warning sign, because eventually these price barriers will come down. As that happens, all that will be left for the utility is the quality of the customer relationship.�
1/1/2015
guest Good write-up- thanks. Part of the antagonistic angry phase comes from an odd paradox. Normally it would just be adding emphasis on customer acquisition and relationship. But in this case the customer suddenly becomes a competitor. A Bridge Too Far perhaps-
In this case, it's literal- 'Power to the People'�
1/1/2015
guest Wow, someone just shorted the daylights out of SCTY. Intense drop.�
1/1/2015
guest ![[?IMG]](https://i.imgflip.com/14okdi.jpg)
�
1/1/2015
guest It may just be market makers, a dozen of my stocks that were climbing simultaneously moved sharply down at the same time. Gotta love how the game is played.�
1/1/2015
guest Seemed like a giant sell order + stops being triggered to me. 400k volume in 2 minutes coinciding with a ~$1.50 drop. That's huge for a $24 stock.�
1/1/2015
guest Ok, so with resorts/casinos leaving this means they'll pay what exactly? And who exactly? Will they employ more people to oversee these processes as well as have to maintain their connectivity? While I thought I followed NV closely, I didn't realize this move was possible. Are there other big businesses that manage themselves on the open wholesale market in NV? Are there case studies available to read?
I find this move fascinating and have a great many more questions like
What is the pie chart of available energy look like in NV? What % from NV energy, wholesale and others?
How much is the typical price paid for wholesale on a daily, weekly, monthly, quarterly or base load basis?
Is the wholesale market typically "greener" or is a very green and does it depend on who or when you buy the load?
Again, very fascinating and I'll be looking for articles today to help answer some of these questions.�
1/1/2015
guest SolarCity: Nevada rooftop solar delivers 1.6�/kWh in net benefits to grid
+add linky to official release:
http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf�
1/1/2015
guest Fairly obvious that these will be the conclusions of any logical study done on residential rooftop solar in the southwest markets. So the question is......
Does SCTY push for more than net metering as part of it's arbitration hearing with the Arizona PUC?
If we all know net metering is more than fair in these markets and we all know that the Arizona PUC will come to the table with a position that is wildly unfair, why not bring to the table a net metering +.01% option out of principle? SCTY should easily be able to prove their option has greater benefit at less total cost.
Things are progressing nicely.�
1/1/2015
guest I think it is more like a parent who overreacts to a teenager who is just starting to express a little independence. The parent is threatened by the child's desire for independence, viewing it as rebellion, and escalates conflict. The paternalism of utilities can be overbearing and downright condescending. Utilities generally do not treat industrial customers this way and should not treat residential customers that way either. So the advantage that SolarCity has is that it can approach residential customers as adults and offer a spectrum of alternatives.
We have a perennial debate here about PPAs, but I think that PPAs strikes a balance between ruggedly independent do-it-yourself off-grid solar and father-knows-best utility power. The key issue along that spectrum is the primacy of customer choice. Many customer will value the convenience and simplicity of utility power. Just pay your bill and the power company will handle everything else. And many customers are willing to pay a premium for that level of service. Another segment wants much more independence and does not trust the patronizing advances of utilities, but one has to work much harder for that sort of independence and the financial advantages that come with it. So in the middle, there is a segment that wants a little independence and savings, but also convenience and service. I think this is middle market that SolarCity excels with. I think the problem we have in discussing this as investors is that our personal biases pull us to either extreme of fiercely independent solar or the utility knows best. In my view, both poles are valid and will remain forever attractive to certain segments. What is harder for some to accept is that consumers will ultimately decide, and there is enormous value in a balanced business model that caters to a middle market.
From either pole, one can try to deconstruct this middle ground, and plenty on this list have tried. But offering a well rounded bundle of product, pricing, service, and financing is a winning strategy in just about every consumer category. If you pick apart the components, you miss the value of a well rounded package. You want the best product? Hire a high-end contractor to build out the system as you exactly specify with the best components. You want the best pricing? Hire a cheap contractor who pinches pennies on everything. You want the best service? Just keep paying your power bill and let the utility handle everything. You want the best financing? Just use all that cash you have just sitting around, or refinance your mortgage. All these are valid objectives with valid solutions. But if you want a quality system, a little savings, with responsive service and convenient, flexible financing options, then SolarCity puts all these pieces together for you with a name that can be trusted. This is really the essence of retailing. Most consumers opt for the middle market solutions that balance a whole lot of competing objectives, capably handle the details, and minimize complexity for the customer. It's about delivering the whole package.
Think about that the next time you go to restaurant. Most of the time we are looking for restaurant that has a good combination of good food and ambiance, good service, low prices and convenience of location and to pay with the means of our choice. Sometimes we are willing to put up with lousy service for really good food, or modest fare for really low prices, etc., but most of the time we are looking for a satisfying combination of all those elements. This is called the customer value proposition. And multiple retailers are able to sustainably compete within the same markets by delivering different, but compelling, customer value propositions. Starbucks has not put independent cafes out of business, nor have independent cafes pushed Starbucks out of business. Rather each caf� delivers on a different customer value proposition.
So SolarCity is a retailer, and they are delivering on a customer value proposition that is winning a third of the residential solar market. For all the nitpicking we can do, that is a damn good position for any retailer to be in. It's all about customer choice, and SolarCity is serving it up. No matter where the technology goes, somebody will need to bundle it into a compelling package, and this is what SolarCity as a retailer does.�
1/1/2015
guest Wow, this is a total slam on PUCN for rushing to judgment without a complete analysis and NVE for lacking a "modern planning process." It's great that this is peer reviewed.
I think the larger stakes here for SolarCity is to sell grid services both to regulatory bodies and utilities and grid operators. So they may be making an example of Nevada as some backward state where the PUC and utilities are clueless. But they still have grid services to sell, even in Nevada. So they need to be careful not to upset key players.
The deeper question is not about the proper use of a spreadsheet from the PUCN. I suspect that many assumptions in this model fail to capture the full range of benefits that SolarCity could deliver if utilities were properly motivated to leverage these benefits. That is, there is a difference between accommodating DERs within the existing grid status quo and redesigning the grid to optimize the value of DERs. The grid contains many legacy assets that may well be worth maintaining and even extending, but would no longer be worth building out new in light of DER alternatives. For example, a 10 mile line connecting a small community to the grid may well be worth maintaining. But if that line did not already exist, it would be far better to set up an off-grid microgrid to serve the community at lower capex and opex cost and with higher reliability. So the DERs in the that microgrid avoid some really substantial system costs, but if the line already exists, it may be cheaper to maintain than to replace with a microgrid solution. So in the one case, DERs have very high value, but in the other case the marginal value is more limited. I suspect that the PUCN spreadsheet model is far too simplistic to capture this sort of distinction, and this is why one needs a modern planning process. Should that 10-mile power line need a costly repair, say after a natural disaster, it may be cheaper to replace it with a microgrid, but you want a modern planning process that can make that determination precisely and quickly.�
1/1/2015
guest http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf
I would encourage all investors to read this report. Section III is particularly helpful. Note that there is even a discussion of the distributed versus utility-scale solar debate that is particularly helpful. I will go ahead and quote this. SolarCity is clearly staking a position that both are needed and offer different benefits to the grid. It is particularly important to understand that small scale solutions derisk the planning process, speed deployment, minimize capital requirements and reduce the risk of stranded assets. This infrastructural flexibility seems prudent at a time of such great transition in the energy markets.
�
1/1/2015
guest Good stuff. Nice to see this report getting some news attention.�
1/1/2015
guest I think this report also reveals a lot about SolarCity's strategy. They are obviously thinking a lot about how their installations create grid value. This is obviously helpful defensively to avoid policy problems, but also it opens up incremental revenue opportunities.
I liked the bit on voltage regulation in distribution. The utilities have to up the voltage a bit to make sure that recipients at the end of the line get high enough voltage, but smart inverters are able make these voltage adjustments along the line and are dispatchable. This gives the operator the ability to assure proper voltage all along the line without having to boost voltage at the beginning of the line. So it saves energy and improves power quality for all customers. This alone created a 0.9 c/kWh benefit even without batteries, but adding batteries improves this as well.
There was also some discussion of using batteries to minimize peak load on transformers so as to reduce degradation of the asset. I think this leads to SolarCity offering a kind of peak shaving service. Batteries that are behind a given transformer could be aggregated to shave peak load off the transformer. This would generally provide power at times of system wide peak load, but it would do so in a way that has specific local benefit to distribution hardware and in aggregate benefit to transmission hardware as well. So as an alternative to peaking power plants, this sort of approach would reduce T&D costs in addition to providing power.
I suspect this sort of setup also shows how utility solar and distributed solar can work together. The lowest net demand will be in the late morning (8-12 AM). At this time, homes with rooftop solar and batters could be sending all their own solar into batteries for use in the evening (5-10 PM). But the home would actually run on utility solar in the morning, while it is storing its own local solar. This takes advantage of not needing to invert local DC solar to store in batteries. Then in the afternoon (12-5 PM), the home runs on a combination of utility solar and local solar, perhaps storing a little more. This may seem a little strange from the viewpoint of a single home, but for the system as a whole what it is doing is optimizing the rooftop solar + battery system to function as a peak power plant for the neighborhood and optimizing the T&D costs at the same time. So this is creating much more value to the grid than what a centralized gas peaker could ever do, as such a plant only strains T&D resources when used in stead of alleviating them.�
1/1/2015
guest Nice to see the stock has indeed rebounded off the post ER low (+40% in 2 weeks), presumably from shorts taking profit and value buyers jumping in since the actual news has been pretty minor. I'm reducing back to my core holdings.
I suspect we're going to sit in the $22-$26 range now until we get some substantial news of some type. Given the negativity priced into the stock, I think it's more likely to be positive news.�
1/1/2015
guest A whole 129 people viewed the panel SolarCity streamed. What gives? Nevada PUC concedes Solar City was right about everything and that existing customers should be grandfathered into the existing system based on the new data! This video should have 10,000 + views!
SolarCity TV�
1/1/2015
guest Can you provide a bit more detail on the video? Was the PUC really there and agreed?
The video is probably great but it's over 2 hours long and most people - myself included - don't have time for that, which probably explains the view count (now up to 163).�
1/1/2015
guest I'm at a loss for words. You don't have the time to watch it and you want me to summarize everything for you? I guess this explains why most analysts aren't bothering to comment in detail on recent developments.�
1/1/2015
guest SCTY's report http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf reminds me of another piece of fantasy Comparative Environmental Life Cycle Assessment of Conventional and Electric Vehicles - Hawkins - 2012 - Journal of Industrial Ecology - Wiley Online Library
even a brief cursory view of their methodology would result in extremely generous valuations for the value of utility solar as well.
![[?IMG]](http://i66.tinypic.com/167162u.jpg)
there is a simple 'sanity check' that easily comes to those in jurisdictions without an integrated electricity monopoly, what would an energy retailer pay for this electricity? Unfortunately for SCTY or NVenergy, its the type question whose answers doesn't match their business plans.�
1/1/2015
guest I value renewable energy from an environmental perspective. Acting to better the environment is a fine example to my family, friends and neighbors. This has real measurable value to me.
Companies like Apple, Walmart, Costco, and Google the (list goes on and on) place value in branding themselves as green environmentally sound organizations.
Individuals and companies have a right to act environmentally responsible. Utility regulatory agencies have a responsibility to act for the greater good.�
1/1/2015
guest Solar in the desert is simply cheaper than forms of production involving a turbine. End of story. The fact that casinos are willing to pay $100M+ to disconnect from NVEnergy clearly illustrates that. All customers benefit when total costs go down.
If consumers want to meet their own power needs with solar, the utility as a regulated monopoly is required(within reason) to adapt to that dynamic. Sabotaging competition is not an option.�
1/1/2015
guest Why Lease When You Can Own? The Tough Question Facing SolarCity�
1/1/2015
guest Well, this is the methodology that the PUCN has elected to use, so I won't try to defend it beyond that regulatory function. However, it is worthwhile to consider how utility scale solar would fare under the same cost/benefit methodology.
Utility and rooftop solar share in the same benefits (per kWh) of Energy 3.7c, Generation Capacity 2.6c, and CO2 Regulatory Price 0.9c. But utility solar does not provide the benefits of Line Losses (0.4c for distributed solar), Ancillary Services (0.1), Transmission & Distribution Capacity (2.8c) or Voltage Support (0.9c). Thus, utility solar has a total benefit of 7.2 c/kWh while distributed solar yields 11.4 c/kWh.
On the cost side, distributed solar has 0.3c/kWh for Program and Integration costs. Utility solar would have the same Integration cost plus specific transmission cost depending on specific siting of the plant. Thus, utility solar could have integration and transmission costs in range of 1.3c/kWh.
Thus the net value of utility solar is about 5.9 c/kWh, while distributed solar is worth 11.1 c/kWh. Under NEM, the participant is saving 9.5 c/kWh on their power bill, which is counted as a cost, so the net benefit to the system is 1.6 c/kWh. A utility solar PPA would need to come in at about 4.3 c/kWh to provide the same net benefit, and fortunately PPAs under this mark are possible. Thus, both utility and NEM distributed solar are cost effective and worth adding to the grid, under this PUCN valuation tool.
But what this analysis makes clear is that one cannot simply compare the cost of utility solar to distributed and conclude that either one wins hands down. Distributed solar adds a lot of benefit to transmission and distribution networks that utility solar simply cannot provide.�
1/1/2015
guest From this article: A grid of DERs: DOE program aims for 100% solar penetration on the distribution system
Isn't this exactly what SolarCity is offering now to utilities? They have already thought about all of this and are way ahead of the game.�
1/1/2015
guest I don't understand why local installers are able to offer lower prices than SolarCity for buying a system. It seems like a switch from buying to leasing shouldn't be a issue for SolarCity and could actually be a positive as it provides more upfront cash flow.
In terms of hardware costs, SCTY with it's higher purchase volume should be able to match or better the cost of the system - and hopefully soon with Buffalo they'll have a real panel cost advantage. Plus they should be at least as good if not better at install costs since they have high volume crews, established training programs and refined mounting hardware (Zep).
Has SCTY just not been aggressive with their pricing for purchases? Or is there some real reason why they can't match local installers. I can see the argument they have more bureaucracy/overhead but that doesn't seem like a major thing. Or maybe it's because SCTY is including extras (maintenance, warranty, inverter replacement) in their pricing?�
1/1/2015
guest It is not SolarCity's strategy or customer value proposition to be the low price leader. Thus far, there is no low price competitor that has reached significant scale. When you buy a SolarCity system the company stands behind it for decades. You have service, performance guarantees and warranties. So you are buying a turn-key system, not just the installation of panels and inverters. Consumers who do not value this kind of premium service can certainly go with lower cost installers, but they may also be incurring greater risks. Anyone who has ever hired a contractor to do work around the house knows that there is a very real risk of contracting with someone who does a bad job. So reputation is very important. One of the supreme advantages of a PPA over cash is that if the system does not deliver the kWh output as planned, the PPA provider takes the economic hit. The PPA provider only makes money as actual energy is delivered. But if you paid cash to a sloppy installer, you bear all the risk. If that system underperforms, you eat the loss. This is also one of the reasons why utilities will buy power under a PPA. It's not because they lack the means to own and finance a power plant directly. They simply want to buy the power without risking the equity of ownership. Now SolarCity is quite willing to sell a system outright for cash, but as a PPA provider it does have a reputation to uphold. So the same care that goes into builing and maintaining a system under a PPA needs to be applies to all systems sold. To provide cut rate systems just to compete on price with no-name local installers would expose SolarCity to serious reputational risk. It's got to stand behind every system it builds. That is why this is a strategic choice.�
1/1/2015
guest Fair enough. Thanks.�
1/1/2015
guest look at from the other side
2015 project price for solar is 4.5c/kWh
2016 project price for solar is about 4.0c/kWh
lets start with the 4.0 c/kWh, and subtract generation capacity of 2.6 c/kWh, that leads to an effective cost of 1.4c/kWh. At that price, natural gas plants simply turn off during the day, because solar is cheaper than the cost of the gas. pretty quickly the scenario becomes one where the wholesale price of midday electricity becomes negative, similar to wind power in texas, except more reliably negative prices.
then subtract 0.9ckWh regulatory price, solar utility becomes 1.4-0.9 = 0.5c/kwh wow
at that price pretty much every non rainy day in Nevada is negative wholesale price for electricity from 9am to 4pm.
then realise that Nevada like to co-locate utility solar near users, for example
First solar at coppermountain Copper Mountain Solar 1 | First Solar
First solar at pumpkin hollow mine NV Energy to study solar on Nevada Copper land to power Hollow copper mine in US
MGM solar Mandalay Bay Opens Convention Center�s 350,000-Square-Foot Expansion & Welcomes First Group | Mandalay Bay Resort and Casino
of course the gigafactory, and neighboring sites.
do we start to subtract the Line Losses (0.4c for distributed solar), Ancillary Services (0.1), Transmission & Distribution Capacity (2.8c) or Voltage Support (0.9c) for the solar farms that are located adjacent to large facilities in Nevada. Because in Nevada, utility solar farms/distributed solar can both describe the same physical location.
so from 0.5c/kWh - 0.4c/kWh for distributed solar gives a cost of 0.1c/kWh
0.1c/kWh - 0.1 c/kWh Ancillary Services gives a resultant cost of zero.
zero - 2.8c/kWh for Transmission & Distribution Capacity because its colocated at a mine or casino or industrial park gives a resultant cost of -2.8c/kWh
-2.8c/kWh - 0.9c/kWh for Voltage support gives a resultant cost of -3.8c/kWh
its ludicrous, but imagine how these phantasic benefits really are, from the perspective of a utility solar developer in Nevada.
I could go on, but its kinda silly. But I would point once again, even adding the value of 'generation capacity' to solar is such a cost benefit that day time wholesale electricity prices turn negative.�
1/1/2015
guest I'm very much in favor of collocation large scale solar with industrial load. This too is distributed solar, so no argument there.
I think however that you are abusing this valuation tool. What you are doing is supposing that you can dump so much solar in a given program onto the system at once so as to push whole prices to negative values. This is not how such a tool would be used. For each incremental project you would need a new analysis that looks at the current state of the system and make sensible assumptions going forward. Look at how the Energy assumption was developed in this report. It was based on making assumptions about future wholesale prices at the time that distributed solar would be producing power. This is the 3.7c/kWh benefit. Now, if the state of the system under your proposal were to drive future wholesale prices to 0c/kWh, then this benefit goes to 0c/kWh. Similarly, you'd need to reconsider the Capacity benefit, as a full 2.6c/kWh benefit may no longer be justified when the system is so heavily oversupplied under your proposal. So maybe this comes down to 1.6c. So along with CO2 regulatory benefits of 0.9c, we are looking at a total benefit around 2.5c/kWh.
This is actually quite interesting to contemplate because these are the kinds of barriers that utility solar will eventually face. How do you actually justify adding yet more solar into an oversupplied market? Indeed this must be done to move to a 100% renewable system. So the solution, I think, is that more needs to be offered than just wholesale power with zero emmisions. So collocation delivering T&D becomes one such path. Another would be to include storage with the solar. Suppose you've got a utility solar system with enough storage to timeshift all the power produced. Then you'd be able to value the Energy benefit at the highest daily wholesale price. So maybe this is 8c/kWh. And the capacity benefit is even larger than 2.7c because this is fully dispatchable power. So let's say 4 c/kWh. Also the battery can be used to reduce integration cost for other non dispatchable power and reduce T&D costs. So another 3c, say. And CO2. So you get to a total benefit around 16c/kWh. (This should be comparable to the benefit of a gas peaker.) So proceeding with this sort of project has much greater potential to add significant net benefit, far more than just adding straight utility solar to an oversupplied market. Moreover, if the project has positive net benefit and gets approval, then it actually works in a direction against wholesale prices going too close to zero or below. Specifically, with sufficient storage, such a plant will never sell into the market below a certain price. Ultimately, it is storage that puts a floor on wholesale prices.
I'd also point out that in a free market solar will never take the spot price below zero. Solar can curtail at zero. It is baseload thermal power that has need to pay to feed power into the market so as to avoid a more costly ramp down. Solar, of course, can take the price to zero, but incurs no marginal cost with curtailment. The exception, of course, is when the market is not free and there are government incentives for wind or solar to keep feeding into a negative price market. But in practice, even where the US PTC has done this for wind, these negative markets have also been oversupplied with thermal baseload as well. The reason why I point this out is that as we try to envision what a 100% renewable market may look like, negative spot prices should only exist due to the continued presence of thermal generation. When there is sufficient storage to get rid of fossil peaking plants, then storage will set a lower bound on spot prices, and once the batteries are all charged up, everything else curtails.
So if I am correct in this, what we will see is that utility solar ultimately must get bundled with storage to be a net benefit to the grid. Meanwhile, distributed solar at all scales will become increasingly sophisticated about providing T&D and other grid benefits. These added benefits will be the only way to justify adding more solar to oversupplied markets. I do think this is a tall order for remote utility solar even with storage. The reason why is that distributed solar will be able to add storage at quite near the same cost. So it offers all the benefits of remote solar with storage plus locational benefits to distribution and transmission infrastructure. For example, transmitting battery stored power at a time of peak load adds stress all along the T&D system, but discharging at the point of consumption avoids all this stress. So once cost of wholesale power gets low enough, remote utility solar loses its key advantage over distributed solar, specifically it's low levelized cost per kWh. But before we get to this point, I think we are talking a grid that has over 6 hours of storage at average load. So I think we are looking out at least ten years from now but probably 20 years from now. Right now there is so much opportunity to displace fossil generation, that it just does not matter much. But we can definitely see that SolarCity recognizes the growing importance of properly address all opportunities for DERs to add benefits of location to the grid. Now they are documenting those benefits, and soon they will be optimizing and monetizing those benefits. This is taking the game to the next level.
(Notice that SolarCity will soon make it hard for any new gas peaker to get approval. Is it clear how this is the case?)�
1/1/2015
guest Another Voice: SolarCity has raised its statewide job commitment - The Buffalo News
Strange bedfellows: How solar and utilities struck a net metering compromise in New York
�
1/1/2015
guest Short shares drop 8% from 23.6M to 21.7M - so a reduction from ~4.5 days to ~4 days to cover.
Solarcity Corporation (NASDAQ:SCTY) Shorted Shares Decreased By 8.16% - Franklin Independent�
1/1/2015
guest It's looking like the Energy bill is getting bogged down with partisan political theater.
This looks promising from the DOE:
Orange Button: A New Data Standard for Cheaper Solar?�
1/1/2015
guest Its my understanding that California has a requirement for Investor owned Utilities to obtain 50% of their energy from renewable (RPS) by 2030. (This seems to exclude both full size hydro and PV self consumption).
Just a cursory glance at CAISO daily demand suggests to me that solar will need to supply nearly 100% of 9am-4pm electricity. With a massively steep ramp following that can only be achieved via battery. Followed by mostly gas power at night. I would suggest that sunny day time wholesale price of electricity will be very cheap, and the cost of night time power will be correspondingly expensive as it now needs to support a lot of asset depreciation.
50% of power is not a big deal for solar
50% of energy is a big deal for solar
look for TOU is California, and batteries, lots of batteries.
Is this good for SCTY, I don't think so,
but it is great for TSLA.
Plenty of room for Buffet to export PV to California, its at the expense of thermal power stations.�
1/1/2015
guest I agree, but it was based on the documents 2017-2019 forecast, its their abuse of the tool.
yeah, but it still needs to deal with repeating but irregular major weather events. a domestic PV system with 100% net capacity is nowhere near sufficient for 'outlier' weather events, and thats approximately the limit that can placed on a residential house. Even a 200% net capacity system is quite insufficient for 'outlier' weather events.
its from a wet summer 2010/2011, I still remember it because it broke a drought, and caused floods (a semiregular occurrence here, the day the flood hit, the weather had turned fine again) Batteries are great for daily cycling, but for big weather events, they need to be powered by an energy source not in deficit. so not solar. going from 95% renewable to 100% renewable is really hard unless there is reliably dispatchable sources (hydro or geothermal).
Perhaps the US equivalent is what happens when every house has PV, but a polar vortex happens? does the US then just rely on the solar in hot dry areas? In Australia, Tasmania's recent issues suggest that funding new gas power stations would've been wise, compared to decommissioning and offering for sale old gas power stations that are surplus.
What I'm getting at is that an annual 1/2 hour black out, or 1/2 day black out is not that bad
but what if it becomes a once in 6 years, a 6 day contiguous black out instead? to many that won't be acceptable.�
1/1/2015
guest #6211renim, Today at 6:17 PM
Last edited: Today at 6:48 PM
NewIts my understanding that California has a requirement for Investor owned Utilities to obtain 50% of their energy from renewable (RPS) by 2030. (This seems to exclude both full size hydro and PV self consumption).
Just a cursory glance at CAISO daily demand suggests to me that solar will need to supply nearly 100% of 9am-4pm electricity. With a massively steep ramp following that can only be achieved via battery. Followed by mostly gas power at night. I would suggest that sunny day time wholesale price of electricity will be very cheap, and the cost of night time power will be correspondingly expensive as it now needs to support a lot of asset depreciation.
50% of power is not a big deal for solar
50% of energy is a big deal for solar
look for TOU is California, and batteries, lots of batteries.
Is this good for SCTY, I don't think so,
but it is great for TSLA.
Plenty of room for Buffet to export PV to California, its at the expense of thermal power stations.
REPORT
? QUOTE REPLY
In my view, you are underestimating the business relationship and "branding" of Elon Musk/Tesla/SolarCity.�
1/1/2015
guest I think California is going to need alot more wind power. This will cover evening through morning and not need nearly as much smoothing from batteries.
BTW I've started playing with hourly data from CAISO. I've been trying to size up how much battery capacity could be used to smooth out supply and demand. The basic metric that I am developing is based on the sum of absolute deviations from a 24-hour average to hourly demand or net demand. This gives you twice as many GWh of discharge needed, but you need about this much capacity to deal with variability and to keep the depth charge between say 35% and 85% most of the time. So California supplies about 24.5GW average. For daily balacing about 2 hour, 50 GWh of batteries, would suffice, and for weekly balacing 9.3 hours, 225 GWh, would suffice. It turns out that there is a lot of weekly periodicity to balance. Tapping into EV fleet charging would substantially reduce need for grid storage, just 1% of autos (250,000) in a fleet charging program could reduce the daily battery requirement by about 2 GWh. Charging on the weekend would also help with weekly load balancing. Adding more wind power has little impact on the daily battery requirement, but solar requires substantially more battery time shifting. So this is the main reason I think the state should pursue much more wind power.
So my analysis is not at all looking at extreme weather events. I think that once California has enough storage for daily balancing, 2 hours, it will be in a good position to use baseload thermal generators to handle variation from day to day. Most coal and CC NG generators are utilized about 45% to 60%. So there is substantial capacity to swing this load from day to day. Peaking plants are really only intended to be used for 1 to 2 hours a day, but just 1 hour of battery capacity will pretty much eliminate that market for short bursts of power. Less flexible but more efficient combined cycle gas plants will be quite adequate for maintaining a sufficient state of charge in grid batteries. So I did take my analysis out to measuring batteries need to balance a whole week. It may take the state more than five years just to 25 GWh of batteries, but the weekly level of 225 GWh may take longer than 15 years. This will no happen over night. But looking out to sufficient storage capacity for weekly balancing gets us to a place where only the most efficient base load plants are needed to make week by week adjustments to the energy inventory in storage. We are talking about a multidecade transition to get to 100% renewables. There will be a glut of thermal capacity over that transition period. So I'm not really worried about building out extra capacity just to handle extreme weather events, and California is not an island like Tasmania. It currently imports about 25% of its power and will continue to use and maintain those transmission assets for quite a long time. I am confident that wind and solar can continue to scale up. The sticky issues are how to scale up battery production, how best to balance the grid with less than 1 hour of storage but lots of solar, and how to manage stakeholders with potentially stranded assets. For battery maker, the key thing is to focus on applications with the very best economics. Once the utilities figure out how to save money and improve service with batteries the market will be quite deep. Consider that the global power consumption is around 2.5 TW. So just getting to a 1 hour storage capacity globally would take ten gigafactories five years of production at 50 GWH/year/factory. It is hard to see a pathway to 2500 GWh of grid storage in the next ten years. So as much as I'd love to see California get 250 GWh by 2030, it's probably not fair that one state would soak up such a large share of the global supply of batteries.�
1/1/2015
guest What Factors Have Driven Downstream Solar Stocks So Far in 2016? - Market Realist
This is a nice comparative analysis. I think it lends credibility to this industry just to have Market Realist give this sort of treatment to it. Sunrun looks like the hot company, Vivint comes out very troubled, and SolarCity is a clear market leader. I invest in SolarCity and SunPower, which comes across as underwhelming in this line up. I certainly hope that Sunrun can catch up in market share, so it needs to grow at a faster rate. Even so, this horse race is good for attracting investors.�
1/1/2015
guest In the second half of May short shares skyrocketed to 28.0M from 21.7M. Wow.
Solarcity Corporation (NASDAQ:SCTY) Shorted Shares Decreased By 8.16% - Franklin Independent�
1/1/2015
guest @dandurston In the second half of May short shares skyrocketed to 28.0M from 21.7M.Wow.
Any positive or negative catalysts on the horizon?�
1/1/2015
guest Something like this could spur a rush to go off grid but it would be an incredible boon to Tesla Energy for batteries on every level for backup.
Why a power grid attack is a nightmare scenario
Also another panel efficiency breakthrough or two wouldn't hurt...
Hot new solar cell
Probably it will take some regulatory or political event to provide catalyst...as if I'm any sort of prediction expert.�
1/1/2015
guest I'm no expert, but I think the main thing holding SCTY back is the lack of an obvious difference between the cost and value of the watts they are installing. Last quarter costs were $3.18/watt and they argued for a value of $3.46, but no one really believes that value (e.g. because customers might default, maintenance costs, they recently sold some to Hancock for $3.24 etc.) and even this only leaves 8.8% to cover all the other costs of running a business. So a lot of people think SCTY is breaking even or losing money on the systems they install and their true retained value likely doesn't exceed their debt.
So when SCTY can clearly demonstrate they are making good margin then the stock will go way up. To do this SCTY could:
1) Start selling a lot more systems (instead of PPA) for a price meaningfully higher than costs (they do have a new loan product that started this quarter). Reducing the uncertainty of 20 year cash flows would be huge.
2) Offload their PPAs for higher pricing ($3.50 may be possible).
3) Make real progress in cutting costs towards $2.25 - their 2017 goal. This could occur by getting a handle on sales costs 2016 and by getting their factory scaled up and working cheaply in 2017.
Catalysts like state laws affect the size of the addressable market, but new beneficial laws still aren't going to help much if everyone thinks SCTY is losing money on each system.
Once SCTY can demonstrate a spread >$0.50 per watt on their systems I think the stock will rise above $50. Once they get close to $2.25 we might see $75 and if they also get favourable legislation then it might crack $100. Conversely, if the credit markets tighten or debt piles too high before SCTY can increase their margin then they could be in real trouble.
So in the short term I see new securitization deals and legislation as a potential positives and the ongoing short selling frenzy as a negative. It's actually impressive the stock has risen ~30% with the 6 million new shares sold short.
I think the next ER will probably be a big drop again unless SCTY shows strong bookings and much reduced sales costs.�
1/1/2015
guest By this methodology, it adds about 4.2 cents / kwh of benefit.
Unfortunately the current premium for rooftop solar over utility solar in the US is higher than that. It needs to come down. This premium doesn't seem to be for fundamental reasons -- it's overhead, marketing, profit margin.�
1/1/2015
guest I'd generally agree, but I'd add that their prices charged to the consumer *also* have to be competitive with the competition. If they have a solid positive margin but everyone is undercutting them on price, then nobody will believe that they'll retain volume.
Right now, it's not clear that they've got a significant positive margin, *and* it's not clear that they are competitive on price! Clear up those two questions and the stock will jump and stay up.
This would be what would prove they could be highly profitable.
If this can be done while their sales price is comparable to other installers *worldwide*. With a $2.25/watt all-in cost they could probably do this.... though the utility scale sector is delivering for $1.33/watt, or $1.54/watt with tracking, so there's still room for more efficient rooftop installers to undercut that price.�
1/1/2015
guest I think it's weird how the financial news/stock markets are so bi-polar regarding solar:
Solar is great and a benefit to us all!
Californians Just Saved $192 Million Thanks to Efficiency and Rooftop Solar
Solar is doomed...especially SolarCity!
Solar Panel Leasing Decreases as More Customers Look to Buy�
1/1/2015
guest It's in their interest to create volatility. Getting our solar information from hedge fund backed news blogs is about as logical as getting political news from Facebook.�
1/1/2015
guest A guy at the Tesla shareholder annual meeting just accused SolarCity of stealing 30,000 $US worth of carbon fibre and titanium frames from his barn.�
1/1/2015
guest Stolen bike guy that they're talking about on the short term thread?�
1/1/2015
guest Yeah. Elon's responses was basically: (1) I don't run Solar City and (2) Ask SCTY questions at the Solar City shareholder meeting.�
1/1/2015
guest Here are 2 vastly different approaches juxtaposed:
South Australia Launches Largest Trial Of Rooftop Solar & Energy Storage
Escalator charges anyone?
Arizona Public Service pushes residential demand charges in new rate case
�
1/1/2015
guest Stolen bike guy looked like a bizarre plant, or maybe a comedian hired to confuse short sellers.
Who let that guy into the building?
From a distance, the person almost looked like Trump from this skit he did years ago.
http://www.taxjusticeblog.org/images/trumpfarmer.jpg
�
1/1/2015
guest <S>With their fraudulent accounting practices and sneaky PPAs I wouldn't be surprised if they steal lots of bicycles too </s>�
1/1/2015
guest Lower demand means higher prices are needed to fill the profit gap. Good luck with that.
The idea that anyone will be "stuck" with SolarCity PPA rates in 5 years is preposterous. APS is here begging for an 8% increase in residential rates to keep their racket afloat.
This is gonna be fun to watch. Any word on when the actual APS vs. SCTY arbitration hearing will take place? Or is it ongoing?�
1/1/2015
guest Demand charges *for everyone* actually work out very well financially for solar + battery. If you're at home during the day, solar peak-shaves. If your peak is early evening, your battery peak-shaves.
Demand charges applied *only* to people with solar panels are just a scam and an attack on solar, of course.�
1/1/2015
guest More BS by APS attempting to hold back progress, and maintain business as usual. If the utilities don't get with the picture, the utilities will run into big problems once battery storage is everywhere. It's not the fault of customers with Solar Power that the utilities are unwilling to cut back on appropriations and funds set aside for additional generation facilities that will be obsolete and redundant before they ever goes online.
BREAKING: Arizona Public Service attempts to weaken net metering - again�
1/1/2015
guest Couldn't Tesla and SolarCity counter with an off-grid battery and solar package directly competing with the utility by financing their own monthly fee? Why bother paying their demand charge if you already have a cheaper alternative utility available since you're only subsidizing the increasingly expensive fossil fuel assets?
APS seeks $11 monthly rate hike, demand charges
�
1/1/2015
guest Published today SolarCity Launches Solar Loan Program in 14 States
It would be great if someone can verify the pricing claims by actually getting them to price your home (and even better compare with local installers). Mule, up for it?�
1/1/2015
guest This article a little more substance: SolarCity launches new rooftop loan product to replace MyPower offering�
1/1/2015
guest People have posted SCTY quotes in the Energy Forum and I've been pleasantly surprised by the /W price. Not that I want SCTY doing straight installs or anything.........�
1/1/2015
guest Sounds good. Why don't you like straight installs TTMule?�
1/1/2015
guest That can't work where central air conditioning is a requirement.�
1/1/2015
guest Residential solar is a massive untapped market, I don't want SCTY doing anything that isn't unique and commands a high premium. Their PPA has unique value that commands a high premium, installs can be done by anyone.
I'm fine with them doing profitable installs just to keep the gears churning in new markets, but I don't want the brand diluted. Not that anyone has a good image of the brand in the first place.........�
1/1/2015
guest Off-grid no, but a moderately sized battery coupled with solar could be a successful move to counter demand charges and other tactics in the chess game against utility greed.
Another instance where SCTY as an energy provider is a better option than a local solar installer. When the utility makes a rate change to screw over solar customers, SCTY can swoop in with a simple solution as long as battery costs decline at the projected rate.�
1/1/2015
guest I'll admit I don't require AC in Seattle so I didn't account for that. Aren't batteries still the more efficient solution as the new GF1 50% stationary output projections would indicate? Maybe they could still figure out a creative way to get enough juice and stay Chile?
Chile Has So Much Solar Energy It�s Giving It Away for Free
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1/1/2015
guest Fannie Mae�s financing for solar: a game changer for solar industry
This is the next logical step for GSEs like FammieMae. It's about time. The opportunity here is to finance 1 to 2 million residential solar installations per year. This can greatly accelerate rooftop solar in the US.�
1/1/2015
guest Xcel couldn't handle a little bit of competition.
Size limit upheld for Xcel community solar gardens�
1/1/2015
guest Finally in Sight, $1-a-Watt Solar Milestone Shows Long Road Ahead
This half of the quote seems wrong, as end user demand for increasingly cheap solar will actually increase, In my opinion. I guess they are referring to utility solar perhaps?
http://www.nytimes.com/2016/06/04/business/energy-environment/solar-power-energy-efficient-net-zero.html
�
1/1/2015
guest Plenty of perfectly intelligent economist and scientists are having a very difficult time seeing what the energy dynamic will look like in 5-10 years. The idea that solar will get to 1%, come to scale nationwide and then for some vague reason SLOW is economically laughable.
About to FINALLY shake hands on my rooftop array in Philadelphia(if the installer will stop pushing the roof inspection back). Could not be more excited and am eagerly awaiting an attack on my right to power myself and have a flexible grid in the background providing services at a reasonable price.�
1/1/2015
guest LEAP-watch update..... far out of money 2018's are getting down to a buy-able level. $80-90's are going for $.30-.35
Almost time to load up before the 2Q earnings report. A few more weeks perhaps.
I'm setting my sights on $80's at $.15 and hoping for a dip prior to August.�
1/1/2015
guest What are you thinking for Q2 earnings? My sense was they've been lowering expectations over the last few months, to the point of major doom and gloom. And the game plan of focused growth rather than uncontrolled growth should work fine, but I don't really know how long it will take for that to become evident and make the doom and gloom seem overdone.�
1/1/2015
guest I was given a call today by an old friend that knows I actively invest in renewables. I think we are about to hear of SCTYs new strategy (very new to me at least) for penetrating new markets without the massive penetration and acquisition costs. SCTY has partnered with an MLM. www.powur.com.�
1/1/2015
guest Yes, someone posted that link maybe a month ago and I looked it up. Seems like a classic MLM scheme (or is that spelled scam?) so I pulled my ears in again. Doubtless it will make some people some money and a few a lot of it, but to me the whole idea is fundamentally unsound and builds on losses for masses. So, no thanks. YMMV.
Plus, it serves up a Big Bear argument on a silver platter.�
1/1/2015
guest While I have never had any interest in MLMs. I think they are perceived as scammy because the majority of people who join don't succeed. While I'm certain there are bad MLM operators as with any industry, I don't think thats a fair argument to discredit MLMs as a whole. Businesses in general fail the majority of the time because people are not very competent financially.
Given that the bears in SCTY and TSLA turn everything into a negative it wouldn't surprise me. But as a practical matter, how would this be a negative for us? We get a free workforce that that feeds us leads. Should some of those leads convert we pay them a nominal fee and very likely a marginal residual which (hopefully) our already thin margins can handle. Just seems like a low cost way to penetrate new markets.�
1/1/2015
guest You're right that if you identify a MLM operation early on that is going to be successful and get in early in the scheme you will experience success. But it's based on an immoral business idea: taking money from the suckers who got in last.�
1/1/2015
guest Admittedly, I was suspicious from the start and not very interested, but I think the plan went something like this:
To participate, you pay the guy who gave you the link say $100 for material etc. When/if you score a sale (the buyer says you recommended the product) you get a cut from the company, the guy who recruited you gets a cut and his boss too, so on. So the more people under you, the more you make. That's the multilevel idea of geometric growth.
As long as business rolls along and sales get made, fine. A low-cost sales force, spreading like wildfire.
But then there's the part where you pay to get in. OK, everyone needs a ticket to ride, and I guess we need incentives too. I'm just a little paranoid when prospects of unbounded wealth are waved around.
And how many sob stories will it take to soil a company's good image? In my youth the big craze was Holiday Magic, a series of cleaning products sold via MLM -- where the real product was the marketing itself. People would buy heaps of the stuff hoping to sell it on to the next hopeful for much more, rising in rank and being able to treat themselves to that Magic Holiday. Only, maybe someone had already sold five years' worth on everybody you pitched it to? Well, then you were out the cash and the next level took the holiday.
Sorry about the long rant. Johan's shorter one is more effective. Plus, he got in before me so I lose.�
1/1/2015
guest If Solar City goes the MLM route, I'll be first in line to sell my shares. I find MLM repulsive and predatory.�
1/1/2015
guest I certainly see how it can be perceived this way. In MLMs selling snake oil where the primary product is monetizing recruitment I would agree. However, with a quality product such as Solar I believe its a business you could be successful in by just selling the product should you be so inclined. Anyway, I just thought this was interesting, I don't mean to derail the SCTY thread with a long debate on MLMs. For the sake of our holdings, I hope the MLM does well and compensates its members accordingly.�
1/1/2015
guest Why are you being so subtle? Say what you really feel!�
1/1/2015
guest I've been looking to refinance and also add solar. This seems like a good match. Would I just ask my lender if they know about this program?�
1/1/2015
guest MLM is a valid marketing strategy where a lot of education is required to sell the product. For example selling water filters that are common in Japan to US customers required MLM to educate people on the benefits of having one. Of course this usually deteriorates into extremely pushy repulsive strategies and obscene markups due to greed. Essentially MLM can be a way to educate and sell a product or a way to exploit greed and sell a product.�
1/1/2015
guest An MLM organization direct selling a product with demonstrated environmental and financial value, and the brand association of Elon Musk is a tremendous opportunity,
How many Model 3s have been reserved without a dime of advertising? If I were a salesman, I jump at the opportunity to pitch an Elon Musk backed product,�
1/1/2015
guest I just realized that whenever the Tesla referral program is in effect then Tesla are basically using MLM to some extent. And that doesn't feel wrong to me.
So it's all about the product I suppose. We've just come to conflate MLM methods with sub par products. But MLM selling solar or EVs isn't about the sucker who got in last, but that in all situations with huge growth potential the ones who get in early are going to profit, more so if the growth can be accelerated, even if that means sharing profits with others in the layers below you.�
1/1/2015
guest It doesn't feel like MLM to me, since when it ends there's no one (or thousands) who put money in and can't make any money left holding the (empty) bag. I'd consider the Tesla referral program "peer-to-peer" marketing.�
1/1/2015
guest Good lord!
I always wondered if SCTY can get any worse. The answer always seems to be - yes, it can!�
1/1/2015
guest If not for Musk's success in rocket business, I seriously would have wondered if TSLA is some sort of scam too, all because of SCTY.�
1/1/2015
guest If *everyone* is charged a demand charge, then yes, this is exactly what happens: solar + battery becomes a compelling offering and people buy it.
If *only people with solar panels* are hit with a demand charge, then the situtation is that the people with large electricity demand and no solar panels are being subsidized by the utility company. These are the people who are the best market for solar + battery, and the utility company subsidy prevents them from switching.�
1/1/2015
guest
I cannot say this appears good. In fact regardless if you think this is a good strategy...or a giant pyramid scheme, I wonder about the following.
With the world obviously needing solar for every reason that those perusing this board know, (and those inhabitants of low lying islands know) why are solar stocks declining? Is the whole game so severely rigged?
With this twist in plot, maybe the demand issue discussion will shift away from Tesla to Solarcity. Something does not add up. This to me is anything but 'organic' growth.�
1/1/2015
guest I don't claim to have all the answers, but I believe many of you are seeing a very different picture than I am. If I'm wrong I'd love to be corrected, as my current investment thesis is encouraged by the idea of the MLM, not disheartened.
SCTY stock has been suffering as we were forced to leave Nevada unexpectedly. We are currently also suffering by the overly high delivered cost of each installed KW. The greatest contributor of this elevated cost is due to expanding awareness in new markets. Once the initial cost of penetrating a new market is overcome, the ongoing cost decreases significantly. The MLM effectively operates as an independent and comparatively low cost, risk free source of leads. We pay for leads delivered and converted, thus making the ongoing acquisition cost fixed.�
1/1/2015
guest I suppose you have to wonder if being associated with this new MLM firm if there is potential to damage or enhance your reputation. Being more expensive than local installers means reputation is a big thing. I suspect it won't do any harm.�
1/1/2015
guest Can't figure out why anyone would want to join the powur MLM when they could just be an Ambassador.
Let's see - with powur I pay $499 and for each referral that goes solar I get $200. Or I could become a SolarCity Ambassador at no cost and for each referral that goes solar I get $200.�
1/1/2015
guest Is there a reason why this Powur thing has just popped up? As far as I can tell SCTY ended the expensive route to leads after 3Q earnings were announced. I almost like the idea of an independent marketing arm that can be effectively laid off as each market comes up to scale, but this seems expensive and unnecessary.
Can someone confirm that this is actually being used in certain markets?�
1/1/2015
guest As a solar power inspector, one driving trend I noticed was that when a homeowner bought a solar system, his neighbors would soon follow. I realize that my experience is anecdotal, however, the data substantiates this trend.
It seems to me, this would dovetail perfectly with a well-executed MLM direct selling effort.
I'm imagining explaining the proven values of solar, to a group of neighbors with a working model as a demonstration. Watching a net meter run backwards is a compelling argument.�
1/1/2015
guest Well for one, most people are likely unaware of the ambassador program. Outside of that, MLMs typically sell the idea of earning revenue on your "downline," also, I believe there is a residual component where converted leads give a very small 20 year residual. I am very bullish on the MLM, if someone has a coherent argument for me to be otherwise I'd love to hear it.
I've never done an MLM personally, but given the number of referrals I've already sent to SCTY, I'm almost debating it.�
1/1/2015
guest I wonder how Musk feels about his image being plastered all over the Powur site. He doesn't let solarcity use him directly in marketing.�
1/1/2015
guest I have to believe that Elon is aware of and actively participated in the powur marketing effort.�
1/1/2015
guest SolarCity (SCTY) Gains as Analysts Sing Praises of New Loan Program
This may be a strong transition in SolarCity's business model.�
1/1/2015
guest Can you cite something that shows this to be true?�
1/1/2015
guest Tomorrow should be very interesting. A bit confused by the lack of volume. My only guess is that shorts are not expecting the stock to make the next leg up. However, tomorrow is the shareholders meeting, and almost no-one is expecting anything to get announced at it. Also, the shareholders meeting hasn't been mentioned by anyone, aside from the strange fellow from the Tesla shareholders meeting
On top of all of that, this thread has been abnormally quiet for the past few months. Even today, this thread only received 10 posts (from 7 people). Interesting measure of what people are and are not paying attention to.
Maybe we should make a thread specifically for questions for the Solar City shareholders meeting?�
1/1/2015
guest You think that guy with the stolen bikes is going to show up? Or maybe he only has TSLA shares.�
1/1/2015
guest Sure:
www.solarcity.com�
1/1/2015
guest If the guy doesn't show up, maybe he'll request time with Lyndon, and say he couldn't make the meeting because he was abducted by aliens? Makes about as much sense as him showing up to the Tesla shareholder meeting and saying Solar City stole his bicycles.�
1/1/2015
guest Sales cost needs to be solved industry-wide and that's about it. There's nothing else to talk about.
Even these utility roadblocks seem to be winning battles here and there, but the war is over.
When costs(mostly sales) come down for SCTY all revenue will hit the algos and it'll skyrocket. Until then.......the beach.�
1/1/2015
guest I don't know why I even bother to engage. That would be like citing Teslas home page and claiming Elon doesn't allow the company to use him to sell cars. Just to waste more time, here is Elon on SCTYs page. Meet the SolarCity Team and Learn About the Company�
1/1/2015
guest There isn't much really to discuss. The stock seems to drift along up or down at random on no news. At least with TSLA we can track X/3 reservations, track deliveries around the world, see the supercharger network build out progress, hear about a cool new feature or update, get an occasional tweet from Elon, etc. An informed reader of this forum can make a pretty good guess as to how the earnings call will go. With SCTY we have basically nothing to go on but pure speculation. There's nothing really on the horizon to get excited about either way. Every post is either why SCTY is doomed or why they will be a huge success. Why one expert says oil is about to plunge and another one says maybe shoot up. I tried "catching a falling knife" as you guys say and played around with options but haven't been able to make consistent returns. I'm working on my career at the moment so just going to hold onto my shares for a few years and spend less time worrying about the day to day noise.�
1/1/2015
guest Giggle, this is definitely the best strategy with SCTY. I'd highly recommend loaning your shares, you can often get between 20-40% in return. Makes waiting quite lucrative.�
1/1/2015
guest I would absolutely do that, but my discount broker (Capital One) doesn't allow me to do that.�
1/1/2015
guest Maybe today's action is related to Arizona? I've heard no news, but the arbitration hearing that was announced more than a month ago should be progressing, right?�
1/1/2015
guest I think today's nice move upwards is because of growing publicity and realization of the value for SCTYs new loan product. A few analysts came out saying how great it is. And it does look great. I believe it's all run by another company that's taking the default risk in exchange for the interest, so SCTY is basically able to get full money up front for their systems. If this goes to 50% of their sales (maybe 2018) their finances should look great. For consumers it looks good with shorter terms, low interest and the ability to retain tax credits. It could be the solution to 1 of the 3 big problems facing SCTY: slow cash flows (the other 2 being regulations and sales costs).�
1/1/2015
guest This is precisely why you don't want to be in this line though. In the long run, anyone can approach these third party lending facilitators and provide a similar product.
I'm perfectly fine with doing profitable installs on an interim basis if the market demands it, but solar-based energy-as-a-service is where the gravy's at moving forward. Do not diminish the brand!�
1/1/2015
guest I'm not an industry insider but to me it looks like "rooftop installations as commodity" view is oversimplifying things. Anyone can cobble together a desktop computer or laptop from parts but there's a lot more to it when it comes to making a product that consumers want. To continue the analogy the way I see the market evolving is we're at the stage where just having a working PC cobbled together from whatever the cost effective parts are available is what folks think they want.
But as the market evolves two things will happen. First, these systems will have to become quite a bit more integrated and sophisticated in managing energy production and consumption, and second consumers would start being more sophisticated and picky about what they get. Sure yes commodity view would still be relevant for a substantial part of the market that is super price sensitive. There's also going to be an opportunity to offer value on top of that which will require scale, regulatory compliance, integration, etc. that a small installer can't offer (unless we're talking about really high end stuff, analogous of a custom built PC). There's all these super thin margin PC makers out there but there's also Apple and Lenovo that make stuff that people pay a very good premium for.
All this time I was trying to answer the question about why is it so quiet here and to me I think until SCTY can clearly demonstrate that the market allows for an "Apple" niche and that SCTY will be there to take that position it'll all be the ups and downs of short term regulatory and execution details which people are burned out from following.�
1/1/2015
guest Carter to meet privately with Elon Musk
The military has expressed tremendous interest in renewable energy technology. Could it be that this meeting covers more than rocket science?�
1/1/2015
guest My hunch is they want to roll out the solar loans together with storage. With both receiving the tax credit it makes sense to bundle a 10 year solar loan with a battery lease. Own the panels, but solarcity controls the arbitrage. The electron production is still just a commodity as it has been.�
1/1/2015
guest Giggle, if you don't mind spending a few minutes, try switching to Interactive Brokers. They are among the cheapest, .70 a contract for options and $1 for stock trades. They also allow you to loan your shares.�
1/1/2015
guest @electracity You posted in the past links to various local installer pricing levels. Could you re-post please?�
1/1/2015
guest Truly amazing. The shareholder conference was 1 hour ago and not a single comment about it. Not even a single person asking why the link on Solar City's website for the webcast isn't working. Elon, Lyndon, or anyone with the ability to fix the webcast link - If you can see this message please ask someone to fix the link to the webcast.�
1/1/2015
guest I hope so, it makes so much sense. Not sure how true this is but I recall hearing that many of the deaths/injuries in Afghanistan were not actually from combat, but rather from fuel supply convoys being attacked.�
1/1/2015
guest I was going to ask. I was looking for SolarCity stuff and ended up here by default. Utilities are not exactly front page material but it would be cool if they had a webcast at least.�
1/1/2015
guest Is this like another "Investor's Day"?�
1/1/2015
guest Have you found a working link yet? I'm having trouble, currently on hold with Solar City.�
1/1/2015
guest OK, so I have now spent (wasted?) a fair amount of time following SolarCity. So here's my current assessment for what it's worth. This is not investment advice.
I think SolarCity is throwing business models at the wall and seeing what sticks. I don't think they've found a sustainable business model yet, but they seem to have tried dozens of business models already. I think they're trying "agile development" on business models. This might actually work; if they can iterate business models faster than their competitors, they might stumble across the best business model first. On the other hand, they might not.�
1/1/2015
guest This term is pretty overused, but solarcity is a "disruptor". That basically means that their whole thing is to find a better business model than the existing status quo. So basically they just pick a plan that get's them to the next plan until they are the 800lb gorilla. My understanding is the plan for now is to start picking their markets more carefully rather than just all out growth, and then probably go back to all out growth when they are making their own panels and pairing them with storage. In the short-term that might not look pretty, but in the long-term it sounds pretty smart.�
1/1/2015
guest Did they have a webcast last year?�
1/1/2015
guest I heard back from SCTY, apparently they do not webcast their shareholder meetings. :-/�
1/1/2015
guest If you think this is the case then you haven't done enough time following SCTY. The PPA model is the logical way to integrate a new type of energy provider into the equation, the market has just not absorbed it yet. Purchasing outright is perfectly fine, but I still don't see the wider population wanting to handle the in's and out's of power generation. Keep in mind we're still working primarily with early adopters here, people like me WANT to be involved in this every day. I believe most folks do not.
Keep an eye on sales cost and when it starts to drift back toward $.50/W with a clear believable plan for $.25/W......BUY!�
1/1/2015
guest What Does a 5 kW Solar System Cost? | EnergySage�
1/1/2015
guest That's pretty informative. Thanks�
1/1/2015
guest Back to the Future: What Role Will Electric Utilities Play in 2030?
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1/1/2015
guest Because who knows what happens there�
1/1/2015
guest SolarCity CEO Lyndon Rive�s Salary Is $77 Million. Mark Zuckerberg�s Is $5 Million
SolarCity has new global sales head
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1/1/2015
guest Another interesting step
Apple establishes Apple Energy LLC subsidiary
Apple establishes 'Apple Energy' to resell green energy back to providers
"Apple has meanwhile told the U.S. Federal Energy Regulatory Commission it should meet the criteria for selling power at market rates rather than wholesale, since it doesn't have major influence in the energy industry and can't impact prices. Should it get permission, it could start reselling power within 60 days of June 6."�
1/1/2015
guest I'm actually quite sure personally that the PPA model is no good, because rooftop solar PPAs routinely have worse TCO compared to buying outright, buying with a bank loan, or even leasing, *and* they actually lower the value of your house. If you have a different opinion on PPAs, I won't argue with you any further.�
1/1/2015
guest Probably stripping down titanium bikes and selling the parts on the black market. Just a guess.�
1/1/2015
guest PPA = utility with price of power known in advance for 20 years. So however bad a PPA is, it is still ahead of the utility, right?�
1/1/2015
guest Saying some form of managed non-ownership model has much greater cost of ownership is as silly as the folks pointing to $1.70/W "utility scale" installs vs. $3.30/W residential installs as if it's going to last forever. The vast majority of the cost difference is due to market immaturity in the residential world and will level out very quickly once solar is mainstream in most markets.
"Utility scale" projects don't have to pay for sales effort, period. That's a 1/3 savings right off the top. The only true advantage is efficiency due to scale, which is obviously not insignificant.
But how long can this insane dynamic possibly last? Is the internet going to stop working?�
1/1/2015
guest http://azdailysun.com/news/local/mediation-between-solar-firm-arizona-utility-suspended/article_9ffe022d-c6a2-5740-86b6-1d77740070b2.html
SolarCity adamant about Buffalo job creation
�
1/1/2015
guest SCTY needs to scrap this mediation if it's clear that the utility has no intention of following through. They're just trying to stall their way through election season so the voter initiative doesn't make the ballot.�
1/1/2015
guest Yep, looks like the stalling worked unless they have a boatload of signatures already...
Solar Settlement Talks Brokered by Governor Ducey Have Been 'Suspended'
�
1/1/2015
guest Well the *sugar* has hit the fan in AZ. Everyone from the AG down to the utility regulators got a little visit from the FBI yesterday.�
1/1/2015
guest Wow. More detail, or a link, or something please! Solar stocks in general took a real hit yesterday, and I have no idea why.�
1/1/2015
guest FBI questions former utility regulator, APS, Corporation Commission
FBI interviews former Arizona utility regulator over election issues
They seem to trying to "follow the money." If they don't get shut down by a Trump win this could get interesting.�
1/1/2015
guest Not actually true. It's a different sort of sales, but they have to prepare a huge flurry of paperwork to make an auction bid to get their electricity attached to the grid and bought by the wholesale markets. And they have to prepare presentations to secure financing. This is pretty much what the residential sales people are doing, if you think about it... trying to get a homeowner to finance a solar system by convincing them that the electricity is cheaper than the alternatives.
The utility scale guys have the advantage that they're pitching to a much shorter list of customers, but it's still basically sales costs!
I'd love to know the answer to that. I'm waiting until the elevated sales & overhead costs of US rooftop solar drop to German / Australian levels before buying a solar system.�
1/1/2015
guest Tesla, SolarCity and SpaceX are pulling "regulatory capture" into the light of public scrutiny. The widespread corruption that exists within these industries will wither under the spotlight.................probably not.�
1/1/2015
guest No, a PPA is not ahead of the utility, it may be ahead of the utility.
Or alternatively, why go PPA when a owned system is 30% more solar PV for the same price.
then there is the whole home resale issue.
leased items are not assets, they belong to the lessor
owned items are assets, they are part of house
so when buying or selling a house, unencumbered PV panels add to the value of the house and easily go into the mortage.
but buying or selling a house with leased panels, is difficult, they generally cannot go into the mortage, and are another deduction that the financier must take into consideration.
so perhaps owned panels add to the house what a percentage of what a new replacement cost would be. But leased panels subtract from the house what the outstanding purchase price is.
Solar can raise home values � if you own the system�
1/1/2015
guest For being super-complex in the background, PPA is super-simple on the front-end. If you want to own a system you should do it. If that's not your thing you can bundle up all the work effort involved in solar ownership and dump it on a PPA provider for a price premium.
I like to picture my 35-45 year old friends in suburban Philadelphia making solar buying decisions over the next 1-5 years(as many of them will). I can't see half of them ever being interested in buying and maintain an array no matter how simple it becomes. Energy costs are just not a concern for them and the "premium" of still paying less than current cost will logically be where they land.
I really think the full service PPA model will take an even larger majority of installs after we're to scale nationwide. 2 years? 6 years? Who knows. In the mean time I guess I have no problem with SCTY doing installs with simplified loans. Something to help keep the lights on in new markets as we get up to speed.�
1/1/2015
guest Greater than the sum: How aggregation is making storage into a software business
Energy Bill quagmire:
�
1/1/2015
guest 1) I think the problem with the prior breakout was the 100dma being too big of a jump 200dma. If the situation in Arizona hadn't occurred,I think Solar City would have stayed around $24, until the moving averages caught up with the upper BB.
2) The US government won't allow states to kill the residential Solar industry.
3) It's very interesting FBI questioning the APS and a a former member of the ACC about an investigation involving the use of Dark money hasn't received more attention. The story broke less than 24 hours after it was announced that Solar City had ceased attempts to work with the APS after one meeting. Maybe this is because SolarCity knows the APS is about to be subject to major scrutiny? Maybe SolarCity doesn't think it wise to negotiate a deal with people who are who are currently being investigated by the FBI for corruption?
http://www.bizjournals.com/phoenix/blog/energy-inc/2016/06/aps-former-acc-member-questioned-by-fbi-in.html
4) Once battery storage enters the equation, any debate over net metering will be irrelevant. Individuals will be able to sell power to anyone. In Germany this is already allowed, and possible. In the USA, I believe this is not currently allowed.�
1/1/2015
guest Truly amazing. Only 1 post in this thread today.
Here is the news of the day that no-one is paying attention to.
SolarCity, Community HousingWorks, & Everyday Energy Partner To Bring Solar To Affordable Housing�
1/1/2015
guest Nothing that happened today is news from an investment perspective.�
1/1/2015
guest I firmly disagree. On top of everything else.
ACC attorney jumps to law firm representing SolarCity, rooftop interests battling APS - Rose Law Group Reporter�
1/1/2015
guest FERC revokes market-based rate authority for Berkshire Hathaway companies
Add 2nd linky:
Berkshire Market-Based Sales Restricted in 4 Western BAAs
Nevada PUC: Upcoming NEM cost-benefit study �won�t win the day�
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1/1/2015
guest It amazes me that people value operations like NV Energy to the tune of tens of billions and throw around the possibility of SCTY going to zero. I mean, which company is on the wrong side of the tidal wave?
How anyone can possibly believe these profits will be there in 2 years is beyond me. NV Energy made $750M last year and will be far closer to zero for 2017. All it takes is a regulatory environment that is marginally fair, state OR federal.
We keep seeing these operations getting scooped up left and right for high premiums as if the entire populace is going to happily bend over forever. Am I nuts here?�
1/1/2015
guest Thanks for the link. I like this part right here. It explains why I think SolarCity is still going to be the winner and leader of this transition.
�
1/1/2015
guest 
Okay. When journalists overstate Lyndon Rive's salary by around $77 million, and these are the two top stories on Twitter, I'm convinced the stock won't go much lower.
The San Francisco Business Times Got My Salary Wrong, But Only By $77 Million�
1/1/2015
guest I know we're not supposed to push politics into this thread if it can be avoided, but I think we're looking at a very crucial 6 month period for SCTY and a lot of it hinges on political winds.
The Senate energy bill is still floating in limbo with lots of fossil interests pushing for less EPA regulation, etc. A Hillary cakewalk is looking more and more likely with the possibility of a Trump nomination also keeping loads of mainstream Republicans at home on election day. There is serious talk of the GOP losing hold of both houses of Congress. I don't think that's the most likely scenario and I don't want to discuss it's likelihood here, I just want to point out that what was once unthinkable is now a possibility.
With the probability of losing the Senate, having to deal with a Clinton WH and having less than a stranglehold on the House, GOP fossil interests are in a situation where it's in their interest to "overpay" for passage of this bill ASAP. To me that is bigger than any day-to-day market issues that SCTY might have since Congress could likely end these state-by-state net metering battles with simple federal legislation. Pushing more of the state-level conversation back to the feds means it's game over and all the uncertainty around residential solar payback periods is wiped out in one shot.
Considering the boatload of concessions the "green" folks got when oil exports we're legislated, I think we can fairly expect something of that magnitude to come down the pike if this energy bill every gets through the House AND the stamp of approval from Obama. What that would look like specifically is above my knowledge of the utility world, but I think it's easy enough to see a path where someone like NV Energy would no longer be able dictate the energy supply at wholesale. Whatever form that rule takes would likely be obviously fair and very palatable to all but the utility interests. It would also be an easily proved net cost saver.
I had hoped SCTY would have sales cost down to maybe $.45/W by this summer, but we're still at double that due to the whole Nevada debacle. I think legislation that enhances federal power to protect residential solar to any degree effectively has the same impact. Sale costs are only high because of the unreasonable amount of power we give utilities in their own marketplaces. If I see a good bill get passed that curtails this power, that's the same as seeing $.30/W sales costs because that's certainly where it'll be before long.
Just my opinion, not investment advice. Installs should be growing faster than guidance, the rules are being rewritten as we speak. This is a huge 6 months for SCTY.�
1/1/2015
guest Virtual Power Plants Get Around Solar Power�s Intermittency Problem
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1/1/2015
guest If New York had further delayed the payment, SolarCity would have found a way to obtain the necessary cash. It's helpful to have a number of billionaire execs who care about their customers and would step in if necessary.
New York would have likely had to pay a penalty for any delay. New York, NOT SolarCity would have been 100% responsible for the delay. Anyone more familiar with this care to shed some light on this?
Although not a perfect analogy, the example of the close call of a US government shut down comes to mind. If workers had been laid off, or simply told to not show up as a result of a delay in agreeing on a budget, I'm fairly sure all of those workers would be entitled to back pay for lost income they would have received once a budget was agreed on.
It would be great if more people were involved in this thread. TMC mods, just a suggestion, but something should be done to try and get more people talking about the Solar industry. It's not beneficial for anyone if there are only 3 or 4 people on TMC who discuss the facts about developments at SolarCity.�
1/1/2015
guest @drinkerofkoolaid FYI I'm reading every post in this thread and I'd like to participate in the discussion but I consider the SCTY company and business too complex to add anything meaningful (too much financials for me). I also don't know where to get some good information about the state of solar in the US, except greentechmedia.com.
Perhaps a good starting point would be to move this thread in a new "Solarcity" subforum, in the the General Forums (next to the existing SpaceX). Or in the Energy, Environment, and Policy. Then, we could have various thread to cover short-term stuff, competition, etc. We could also make a list of reliable sources about solar tech, residential demand, supply, competition, politics... @jhm is doing a great coverage of oil-related news in a TSLA thread but he frequently talks about the impact of oil and gaz on solar energy. Outside of TMC, I've recently noticed some solar-tagged posts on electrek.co (a great blog to follow Tesla, by @FredLambert).
In a nutshell, it would be help to re-organize all the energy topics (!= transportation) in one place on TMC, and help other members understand the business.�
1/1/2015
guest Historically, there was opposition to even having a SCTY thread, let alone a whole sub-forum. I'm not going to get into that one.
I confess that I just don't understand what the market thinks about SCTY and solar stocks in general. Yes, the oil glut hurt, but it shouldn't have hurt the industry that much, since oil isn't directly used for very much electricity generation. The problem seems to be that the oil carries natural gas with it, and that is used. But still, we know we have to get off that too. Anyway, I'm fairly heavily invested in Solar, and all of those investments are in the red.
I do see SCTY as more of a financial engine than actually a straight solar energy play.�
1/1/2015
guest If you look at those numbers, the difference in home value between "owned" and "leased" is between 7% and 14% of the value of the home before buying/leasing solar panels. That's a lot.�
1/1/2015
guest There's a lot of skepticism about *particular* solar stocks. Even among those of us who are absolutely certain that solar is going to take over the world energy market (and I am quite certain of that), it's very hard to tell *which* solar companies will survive -- the market leaders in 10 years might be companies which are currently privately held. It's an ultra-competitive market. This may partly account for the persistent weakness in solar stocks, even when news is good for the industry as a whole.�
1/1/2015
guest This is fascinating news. It's interesting that FERC has actual standards for whether a market is a real competitive market or controlled by a monopoly, and BH Energy has just fallen on the wrong side of the standards in several more regions.�
1/1/2015
guest In case anyone is interested (and hasn't already seen it), I'm tracking SCTY's short interest rates at Fidelity in the Tracking short interest thread. I update when there's been a rate change, so if you don't see any new posts for a while, you should take it to mean that the rates are unchanged. (Or maybe I died.)�
1/1/2015
guest FACT SHEET: Obama Administration Announces Federal and Private Sector Actions on Scaling Renewable Energy and Storage with Smart Markets
Are Clinton's solar goals feasible?
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1/1/2015
guest Does solar power have a bright future in Houston? SolarCity thinks so
�
1/1/2015
guest Will Hillary Clinton be elected POTUS?
Will she choose a strong progressive (I.e. Elizabeth Warren) as her running mate to coalesce the Democratic Party?
If she is elected, will her down ballot influence regain Democratic control of the Senate and House of Representative?
All of these potential political events will dramatically impact whether or not Hillary's solar power plan is implemented and to what degree.
Since I believe climate change is the greatest challenge facing mankind, I am campaigning for the Democratic Party.�
1/1/2015
guest Why Hillary Clinton could be the solar industry�s new best friend
Will the stars align?
140 jigawatts, isn't that enough to power an influx capacitor?�
1/1/2015
guest Hillary's "plan" has no details that I can discern and projects out to the same growth rate we are already experiencing. So essentially, if Jay-Z were elected POTUS we would likely eclipse that same 140GW figure by 2020.�
1/1/2015
guest There doesn't seem to be much SolarCity news so far this week so I linked a couple related stories of energy industry doom and gloom...which makes me feel better about their future "green" business model.
http://www.nytimes.com/2016/06/20/us/as-wind-power-lifts-wyomings-fortunes-coal-miners-are-left-in-the-dust.html?ref=energy-environment
Texas facing massive well cleanup costs after oil bust
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1/1/2015
guest Do you mean Jay-Z in contrast to Donald Trump?�
1/1/2015
guest And then there's this.....www.greentechmedia.com/articles/read/Deep-Politics-Dark-Money-And-Fraud-Join-the-Solar-Party
�
1/1/2015
guest PUC general counsel out after tweet under pseudonym
Doubt will change anything, but interesting nonetheless...�
1/1/2015
guest Wow. This is the utility commission charged with protecting the people of Nevada from the effects of this monopoly. The people of Nevada are paying for a bunch of lawyers to spam the internet in support of stealing their money. Hilarious.
How are these things not bigger news? The outrage angle is certainly juicy enough.�
1/1/2015
guest Nest is pushing further into the energy business with SolarCity partnership
Along those lines partnering with national and local building developers as a solar subcontractor seems like it would be an explosive business opportunity with low sales costs.
What It Really Means to Require Solar Panels on All New Buildings
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1/1/2015
guest scty is up against some really defensive industries. looks like its on its way to test the 20.5 support soon. are there any positive catalysts lined up for scty? it looks like areally rough fight so far.�
1/1/2015
guest Tesla offering to buy SolarCity - $26.5 to $28.5
Tesla blog post - Tesla Makes Offer to Acquire SolarCity
8K by SCTY- SolarCity - Other�
1/1/2015
guest Incredible!�
1/1/2015
guest Worst case scenario for me - all underwater LEAPS will be effectively written off. I kinda dread having to understand the tax implications.
Pig picture though I think this is great. There was always a slight lack of cohesion in Tesla Energy and SCTY dealings. They would be synergistic with each other but also have to make their products work with third parties at the company seam. Now there would be no seam and no need to worry about third parties unless there's an actual business need to do so.�
1/1/2015
guest Congrats to all longs. Underwater LEAP holders notwithstanding. Options are always a crap shoot. I wonder if this will happen?
RT�
1/1/2015
guest Asian tesla Auto factory will go up at Solarcity silevo site in China. Already had signed contract option to expand site to a few hundred more MWs of panels, but might be enough room to convert to auto factory instead.�
1/1/2015
guest WTF. I guess I can cancel my pending orders at least. sigh.�
1/1/2015
guest Does anybody have advice for a novice investor that has long positions in both companies. I assume TSLA will be down tomorrow and SCTY will jump up. No intention of selling any of my TSLA stock on this news. Should I sell some of my SCTY stock tomorrow as a hedge in case the deal doesn't go through? Should I sell some SCTY and buy TSLA at depressed price? Should I hold altogether and wait for deal to go through? Any advice/thoughts greatly appreciated?�
1/1/2015
guest Are there any options experts around? Since this deal is a buyout via stock, not cash, this website (link) says things work differently, namely:
All-Stock Offer
With an all-stock merger, the number of shares covered by a call option is changed to adjust for the value of the buyout. The options on the bought-out company will change to options on the buyer stock at the same strike price, but for a different number of shares. Normally, one option is for 100 shares of the underlying stock. For example, company A buys company B, exchanging 1/2 share of A for each share of B. Options purchased on company B stock would change to options on company A, with 50 shares of stock delivered if the option is exercised.?
[I underlined "same strike price" for emphasis.] Can anyone confirm this is true? Same strike price for SCTY->TSLA options? The current offer is each SCTY share becomes .122 to .131 TSLA shares. Let's say I'm holding 10 Jan'18 $25 SCTY call options I paid $10 each for. So instead of losing $9k or so ($10k -> $1k), do I really get 1 Jan'18 TSLA $25 call option? (I assume fractional options are lost?) In that case I make something like $7.5k ($10k -> $17.5k)?
Update: rereading it, clearly I'd end up with 10 J'18 TSLA $25 "call options" where the "options" are somehow for 12 or 13 shares instead of 100? How would that even work?�
1/1/2015
guest Dang. Cost basis over $42
Big picture agreed probably good. Real question is what happens to Chanos?�
1/1/2015
guest Yeah I doubled down on my leverage twice already so I'm almost entirely in underwater LEAPs. Never expected this prolonged dip so I've been waiting it out, but my cost basis was still @ $52 hah. Oh well.�
1/1/2015
guest SCTY up $4 after hours and TSLA down $25! If this holds til open I'll be dumping one to buy the other. If things go all screwy would they have to adjust the offer, or withdraw it?�
1/1/2015
guest Interesting take:
Elon Musk Eats the Shorts�
1/1/2015
guest Uhh.....wow. Didn't see this coming.
I've got equal TSLA and SCTY holdings so this is close to neutral for me.
The big negative after hours move by TSLA might make the actual acquisition less likely to go ahead. If Elon truly is going to abstain in the TSLA vote then it looks like a lot of TSLA shareholders will be against the deal just based on the impact to the share price.
I need to research this more, but if I could sell tomorrow for ~$26 that would be appealing. I first bought SCTY at $77 but have made a number of fortunately timed trades, including doubling down at $16.88, so my cost basis is $20.44.�
1/1/2015
guest Well I have no idea what to do now...only thing I'm already used to is that I'll be thoroughly screwed.�
1/1/2015
guest Do you suppose Elon knows something we don't?�
1/1/2015
guest If he does, he'd better tell us or else this deal won't get approved.�
1/1/2015
guest I'm struck by the fact that we're all small, individual investors, and often emotionally involved in one or both companies. What we think doesn't matter. The institutional investors will determine what happens tomorrow, and they don't trade after hours.�
1/1/2015
guest Anyone want to take a shot at explaining how this deal makes sense for Tesla?�
1/1/2015
guest Hillary�
1/1/2015
guest I think Tesla sees long term value in owning SCTY and would like to buy SCTY in a year or two post Model 3, but they also know that SCTY is really cheap right now and it's likely to rise a lot in late 2016/2017, so the good timing to buy SCTY outweighs the poor timing for TSLA
Lyndon Rive reiterated on the call today that SCTY will be FCF+ in Q4.�
1/1/2015
guest That is actually one of my theses. She's going to be president and solar will rebound heavily.�
1/1/2015
guest That's one heck of a gamble and a president isn't a dictator; odds are she'd have trouble getting anything through Congress.�
1/1/2015
guest Okay, this maybe a noob question but since this is a straight up stock swap, if I hold onto my SCTY shares to the bitter end will they be converted to Tesla shares per the ratio stated in the bid letter or will I just be bought out.�
1/1/2015
guest Converted to TSLA.�
1/1/2015
guest Yeah but markets already starting to call it. Dems going to pick up a ton of seats if Trump keeps declining to fundraise for down-ticket Repub candidates. Trump has 30 ground staff nationwide. Hillary probably has at least 30 in every state. Unless she's indicted and convicted of a heinous crime, she's the president and I will probably bet on it.�
1/1/2015
guest If Hillary's down-ballot influence regains the Senate and House of Representatives for the Democratic Party, the solar industry will explode. The implosion of Donald Trump and the Republican Party will have tremendous consequences for the stock market and energy industry.
I for one think Elon is taking a very calculated risk. He knows what he's doing.�
1/1/2015
guest That a tough one. It obviously makes sense for Musk and his cousin.�
1/1/2015
guest guys, I've been storing my bullets ($$) just for situations like these. Which should I buy? SolarCity or Tesla? Personally, I feel my strategy should be to go in on SCTY first, sell after making a profit and buy TSLA next. The reason I feel for not buying TSLA at the next market opening is because TSLA might not bottom out yet, and may drop further once market opens. What do you think?�
1/1/2015
guest I would buy tsla. If the deal doesn't happen the stock will spike and Scty will drop. If the deal closes you own both. If it'll drop further is your call. I own tsla 4 to 1 with Scty. Tomorrow will be a rough day for me�
1/1/2015
guest http://nymag.com/daily/intelligencer/2016/06/trumps-campaign-still-a-garbage-fire.html
Some very telling data points in this article. I used to do this for a living and if I was a Republican running in 2016 in a weak Congressional district who was counting on a national party ad spend to lift me to victory, I'd be crapping my pants right now.
I mean, it's definitely the long game, but if someone told you they could guarantee Hillary wins and carries enough Dem seats on her coattails to make serious renewable policy strides all but certain, you might think now is a great time to invest in the beat-down solar sector.�
1/1/2015
guest Don't know what you mean, I think that would cinch it for her.
She'd get all the Trump votes...
I'd vote no currently on the SCTY from a timing standpoint (selfishly given my current investment). However, this is a very long term play by Elon. The technology coupling integrates all of this using SuperCapacitance layered solutions. And integrates technological, manufacturing, product solution set, and customer acquisition (I agree with Bonnie on this front- it's a total back ending of the dealership model- I suspect they are bending over backward trying to figure out a way around this move- but they might as well bend over forward to receive what's about to happen to them).
I think Elon's been positioning Tesla for this with the personnel and research associations we've seen. There is no long term profit in Solar as a utility (and he knows it), nor as a stand-alone product or industry (imo). The utility of power is under sever disruption and is entering a permanent self-destruction (including Solar based utility, as the cost of energy is headed to near zero).
I'll be increasing my TSLA position on this as a long term investment.
For the forum, good news bad news as well. We already have a SCTY thread, that's good; but Tesla will have less to do with the Motor part of the Tesla Motor Club... We'll need a new name soon
Stay Cool...�
1/1/2015
guest How about this:
The purchase offer fails without Musk's vote. But the Tesla offer gives SCTY owners and lenders more confidence.
Perhaps the point of the offer is that it is beneficial regardless of the outcome.�
1/1/2015
guest This is a bailout. There are no two ways about it.
This is a done deal.�
1/1/2015
guest Oh, that's actually quite simple. If the merger isn't approved, nothing happens.
If it is approved, this is a stock-for-stock merger. Your LEAP for 100 shares of SCTY converts into a LEAP for 12.2x to 13.1x TSLA shares (depending on the final agreed conversion rate), same expiration date. (Just like the shares of SCTY convert to shares of TSLA). There will probably be a funny trading symbol for "TSLA1" options, which will be the converted SCTY options.
Yes, that's exactly what happens. They'd even be for 12.2 shares or 13.1 shares, and they'd be listed as "TSLA1" options.
If you actually proceed to *exercise* your option for 12.2 shares, however, they will give you 12 shares and some cash.�
1/1/2015
guest My leaps are so far underwater they are scraping the bottom of the ocean.
Of course after 2 years of being patient I sold half my SCTY last week. I try and look at the bright side though...even if I held them he stock has not rebounded nearly enough to breakeven...15%.... I need 60!�
1/1/2015
guest Well, technically, he certainly does.
For one thing he has access to the internal financial details of SCTY, which we don't. I would love to know the exact contents of the balance sheet: how many bonds of each interest rate and each duration, the financing details on each and every one of the "special purpose entities", who bears default risk on each of them, etc. SolarCity has been censoring those from published reports based on commercial confidentiality. But Elon as Board Chairman has access to them.�
1/1/2015
guest I'm with you I'm afraid. Personally decimated although I like the merger overall because Tesla Energy was what had lured me in the first place.�
1/1/2015
guest I wonder if the recent secret meeting at pentagon with Elon has anything to do with his SCTY buy over decision�
1/1/2015
guest No. I was just thinking it occurred after the IEX got the go ahead to become a full fledged exchange. If you've read Flash Boys you know it's the only fair exchange that does not cater to high frequency trading predators. This might be the condition necessary to really burn the shorts. Of course that would assume Elon cares about stock price, which I'm not so sure of.�
1/1/2015
guest That will teach them.
Since most shorts certainly borrowed these shares near 52W-lows he can hurt them and get SCTY at a bargain at the same time!
Win-win. Another genius move.
PS: Investors who bought SCTY at $60-90 don't need to worry. Once the merger synergies kick in, Tesla will soar. You will make back your short-term paper losses in no time.�
1/1/2015
guest I am having a very very bad day. I'm getting crushed on my TSLA and SCTY holdings simultaneously. Can anyone tell me what happens to my SCTY Leaps if the merger happens? I feel like throwing up over here.�
1/1/2015
guest Annoyed that this has come at a time when I'm too busy to discuss in detail! Interesting possibilities to say the least and as a holder of many many 2017/2018 LEAPs I'm less than thrilled.
In the big picture:
A) I don't see any way this gets approved by TSLA shareholders if Elon abstains, so it's more likely just another Elon trick to reset the price floor and try to squeeze the shorts. I think SCTY can and will show the positive changes expected by 2Q or 3Q earnings and the stock will jump. Then there's the post-election squeeze. He's just trying to buy time.
B) It would however set up Tesla to follow the path I'd most like to see. Bring it all together under one umbrella then sell off the car business to Apple and put the cash into Tesla Energy(soon the largest energy provider in the US, then world).
Good luck investors!�
1/1/2015
guest Timing wise for external catalyst the Energy deal is in the final battles and FTC intervention:
�
1/1/2015
guest damn... i just bought SCTY shares at 24.38 in pre-opening hours and now it's dropped to 22.++....�
1/1/2015
guest My understanding from a link posted on a previous page is that SCTY LEAPS will be converted to Tesla LEAPS, but for a much smaller number of shares and of course at higher strike prices. That is because this is an all-share transaction instead of a cash transaction.�
1/1/2015
guest I'm surprised the market views the acquisition as very unlikely to occur (as it's only moved about 1/4 of the way from it's price yesterday towards the acquisition price). I'm not selling here. Even if it doesn't happen, I think there will be times when the market thinks it is likely, so I'm not looking to sell under $25.�
1/1/2015
guest Some points to make:
Solarcity has approx. 100 warehouses in 20 states. These sites also will house and distribute powerwalls and powerpacks around the country
They have dozens of patents through silevo, zep, and homegrown. These tech specialties are critical to a fully integrated tesla product unmatched globally by any competitor on the planet.
Solarcity has a massive software IP. This software integrates the entire business from from customer introduction to final installation and account management. And it's already in the field with 100's of thousands of customers and pending customers. This is a massive value to tesla as the model 3 gets into production as well as mass scaling of tesla at that time.
Solarcity also has the grid services software and energy management of aggregated systems software in advanced development. That alone is worth the aquisitiion and Peter rive is the central figure in sheparding this program.
Special note on zep being significant because of its patents and expertise in mounting platforms technologies, but also for its key international relationships with important targeted tesla motors markets in Asia, Australia, and Europe.
Solarcity has a skilled labor force thousands strong. A sales and marketing team on the ground and in neighborhoods thousands strong. (Tesla has no mobile sales force and this would be a massive boon to sales exposure outside the stores)
Solarcity is by far a major steal for tesla and I think it is important to note Elon is a little underselling the current situation and focusing on the future synergies. If he really broke down all that Solarcity has to offer, he would have to significantly raise the offering price and that would surely kill the deal for the tesla shareholders immediately.
Even though I've always loved the idea of a strong relationship between Solarcity and tesla, I think Solarcity shareholders ought to demand a further exploration of value brought to the table.
Its time for Lyndon to take the floor and give a detailed value discussion of what Solarcity brings to the table in person.
I think most analysts (and many shareholders) are ignorant of this true current value... As well as the regulatory realities of the how far in the right the solar net metering and benefits of rooftop solar are to the grid and all electricity consumers.
I think now is the time for Solarcity to develop a major media "roadshow" on selling rooftop solar and the value it brings to all electricity consumers regardless of if you have it on your roof or not.
This "campaign" for a lack of a better term is ripe to take center stage because the interest level is massive right now. People would pay billions to generate this kind of interest. Now is the time for Solarcity to take advantage and sell to the public.�
1/1/2015
guest SCTY 52 week high is $61.
The board voted unanimously in favor of Tesla's offer at less than half the 52 week high.�
1/1/2015
guest nm.�
1/1/2015
guest Hilarious. close price for SCTY at the same level as Monday, while TSLA tanks.
I guess thats one way to **** things up�
1/1/2015
guest I apologize in advance for my amateur hour questions...
So if this merger goes through, would this be considered a forced sale of my shares? For instance.. If I have an average share price for $35 and Tesla buys solar city for $25 a share. I am effectively forced to take a loss on these shares at $10 per share... Can I claim capital loss on my taxes? Would I have to sell my shares before Tesla buys them?�
1/1/2015
guest The shares won't be bought, but simply converted to Tesla shares, so there shouldn't be any loss or gain to report unless you sell first, aside from any small sale of fractional shares that can't be converted.�
1/1/2015
guest So basically I would be way overpaying for Tesla shares? Or, if I sell today I can claim a capital loss then just go ahead an buy Tesla shares or some other company shares?
Edit: I hadn't given much thought to sell strategies. As I am young and have been more concerned with just finding good buying opportunities. This seems to have potentially changed things and I just want to make sure I am not making worse moves than I already have.�
1/1/2015
guest Yes, you just over-paying for Tesla, but not much more than if you had purchased Tesla at a higher price a few months ago. I am not entirely certain about how claiming a capital loss would work if you buy Tesla and Solar City is then converted to Tesla in the near future, but I imagine that what you said may be ok, at least if the deal takes some time to go through.�
1/1/2015
guest Can anyone give some insight on the market for 2018 SCTY call options moving forward? Looks to me like there was some minimal movement at the far-out-of-money range today at very low prices(for obvious reasons).
Does the market for LEAPs adjust to the likelihood of a merger? In other words, is it going to be wildly cheap to buy $80+ 2018 calls on SCTY since there's at least a chance they will be rendered nearly worthless within months?
Just took a look and it appears at least 1 contract $75's were bought at $.01 today. Am I misreading this board? $115's @ $.05 and most others unchanged with no volume.�
1/1/2015
guest I was also just wondering what would happen to SolarCity employee stock options. I was thinking about Lyndon's performance benchmarks like Elon has with Tesla.�
1/1/2015
guest Did anyone else notice that Elon mentioned the integration of the inverters into the power wall? If you have a unified car charger, power wall and panel system tied to the grid I would imagine you have an opertunity to deduplicate some hardware.
Even if they are designed to work together having separate product support chains even if they are subsidiary companies owned by a parent is one of my least favorite things. Having a unified point of contact for support and sales is one of my favorite things when I make purchasing decisions. From a brand perspective this makes tesla more attractive as a one stop shop for your total energy needs. Solar and a mix of other sources replacing combusted old dead things is inevitable at some point. If you don't believe this I can't fathom why you would own either stock. If you accept this and you actually accept the stated goal of accelerating the inevitable future of sustainable transport then the merger makes sense... at least to me.�
1/1/2015
guest A home solar system using major brands can be repaired by any competent solar company. Just like a Camry. A Tesla home solar system will likely need to be repaired by Tesla. Just like a Model S.
A grid attached solar system is the least critical appliance in the home. I am more impacted about my coffee machine not working in the A.M. compared to the solar system.�
1/1/2015
guest I suppose that would be one hell of a lottery ticket if the merger doesn't go through! Hmm I should look at that...
Well the ratios quoted in the announcement indicated SCTY was valued at 26.5 to 28.5 so selling now would be a mistake. When the news was first announced the after hours stock prices went all screwy and I thought about doing exactly what you talked about. By opening yesterday the market had corrected that imbalance and my amateurish back of the envelope math said it no longer made sense - I will wind up with more shares of TSLA if the deal goes through. If the deal doesn't happen I stand to make more money if/when a short squeeze happens when Solarcity gets to cash flow positive.
I'm not an expert, but I think the best course of action right now is to wait and see what happens.�
1/1/2015
guest I'm buying SCTY this morning. The deal is likely to go through. Shorts are driving down both stocks and they are calling it a hedge play, as they believe SCTY is dying and will either go to zero or bring down TSLA if deal goes through.�
1/1/2015
guest as SCTY shareholder do we get to vote? If so, how do we go about it?�
1/1/2015
guest I expect we will get a letter inviting us to vote, in a number of weeks from now. The companies have to do some due diligence, which takes a bit of time, but after that all shareholders of both companies will get to vote on the precise proposal. Note that a significant amount of shares are held by big institutions, in TSLA as well as SCTY, apart from Elon's holding and a few more who will abstain due to conflicting interests.
That's my take.
Edit to add: I hold both scty and tsla, about 3:100. (Just added a few tsla today�
1/1/2015
guest I thought about this again and I'm really torn. I've always thought Solarcity and tesla were synergistic companies that would be hand in glove all the way through maturity decades from now. A combine is a natural move and I expected something like it to happen.
However, this offer is extremely low balled and it insults Solarcity investors most of which Will come out far worse on this deal then ever expected as long term(even medium term) investors.
I feel like when Elon opined about PayPal being forced to sell because they couldn't exist on their own under the ubiquitous overlord EBay. It was "you will be assimilated or die trying to compete" and that was that and the sale went through. At least they got a pretty good value for being assimilated.
How the tables have turned with Elon in this respect, but I dare say far worse. He's saying "you will be assimilated and at the multi year low,worst possible value for you."
This is a terrible exchange of stock. In order to vote yes, Solarcity investors must demand a better deal or wait till they can afford true value exchange.
I can't see a scenario where most medium and long term Solarcity investors aren't losing significantly on this deal if it goes through as is.
Peter rive drops from (rough math)approximately 2,500,000 shares of Solarcity to about 300,000 tesla shares. I can't imagine what the rest of the key management like tanguy Serra and the others are thinking right now other than a massive, massive salary raise into millions a year as compensation.
Again, the terms are terrible for Solarcity investors as is. At a minimum, a doubling of the offer would be negotiable in my opinion. Bottomline, the deal is far from fair and Solarcity investors should pump the brakes on a positive vote until a wildly better offer is served up.
I've concluded I really really like the idea of the aquisition, but I really dislike the deal terms.�
1/1/2015
guest Well we can't have it both ways. If 2016 sales costs were $.35/W as expected, SCTY would have no issues at all. $.91/W sales cost makes the model unsustainable as solar continues to advance toward scale in the US. I mean, I can get a quality install in my immature market for $2.75/W all-in.
IMO taking SCTY operations under the Tesla umbrella will add the scale and branding necessary to negate almost all that sales cost. That makes Tesla PPA immediately the best choice(as it already is) and profitable. SCTY gets to keep moving much more cheaply and TSLA gains the future largest energy provider in the US. When this org splits in 3-5 years, Tesla Energy could very easily be worth more than Tesla Motors.
The other option is to take their foot off the gas even further to cut costs. Elon does not see this as a viable option as it screws with his vision, plus we already saw what cutting out of Nevada did to the balance sheet for 1Q16. It drove sales cost to $.91/W which is the very thing making financing more difficult and expensive. The negative feedback loop from there could be problematic and require a cash infusion. I'm sure none of that is appealing to Elon either.
This the beginning of yet another all-in move by Elon. I'm taking a both on my LEAP options, but I'm not about to complain or bet against Elon's eventual success. I will vote to merge even though it's not in my interest because sticking to Elon's vision is of paramount importance.�
1/1/2015
guest Well, at least a SCTY bull being as unhappy about the offer as a lot of the TSLA bulls suggests to me that it actually is a fair deal for both companies.�
1/1/2015
guest As I understand it (not very much) the deal will not happen today or next week, but due to Elon's special ownership he is obliged to give official and advance warning, as well as recluse himself from the actual deciding vote. Which I guess will happen one or more months or quarters from now. What the two companies' shares are worth on that day is still an open question, to my mind, and that's probably why the exchange rate was given as a range instead of a fix number. It does mean they will trade in tandem for that duration.
But like I said, this is certainly not my field of expertise, I only try to assimilate some wisdom from this forum and other sources. Which I do consider the wise thing to do, if one can't research more directly -- in which case we are very greatful for a crumb or two!�
1/1/2015
guest I *think* SCTY options would be changed into TSLA options with goofy strike prices (based on the conversion factor). Interesting to consider if the offer was a cash offer at 25/share out of the money leaps would be basically garbage (if the deal goes through there is no chance of them ever being in the money). Something to think about for small companies.�
1/1/2015
guest
The only reason s,g&a are up is because of the Nevada debacle. Nevada market was shut down in literally one day and they had something like 40mws-80mws of bookings here at that point. That was a significant blow at the time and also was a significant blow to being able to predict for quarterly projections in addition to the uncertainty California net metering decision had on estimating installed MWs. The costs were spread over the MWs so q1 was an anomaly due to this illegal disruptions in Nevada.
I expect you know this. It is interesting to me so many of us have amnesia when it comes to context of these numbers. The whole point of reducing costs was to be ready for the ITC step down, but the ITC was unexpectedly extended at full 30% thru 2023... The the cost reduction pressure is far less right now as well given the context of of this so a bump up because of an anomalous Nevada decision doesn't change the fact Solarcity is a solidly building out a network of extremely valuable revenue generating assets profitable year one.
I feel if Solarcity had a better media engagement team they could really shutdown all the disinformation/propaganda/trolling that infests the financial news outlets including some mainstream media. When everything you learn about Solarcity comes out of the mouths of Jim chanos and Jim Cramer there is something really wrong in the world.
Bottomline, financials in context are very solid .�
1/1/2015
guest I'm both a scty bull and tsla bull. I own both. I love the aquisition, but hate the terms. Scty is getting shafted. Tsla is getting stroked. Terms have to be changed or scty investors will revolt (since the fix is in on the yes vote already).�
1/1/2015
guest But how much of a premium should they be paying over SCTY's current share price, which is what the market has determined is fair value?�
1/1/2015
guest Will Tesla get a better deal on all the solar panels on the Gigafactory with this deal?�
1/1/2015
guest "Market value" is not the current value which is at multi-year lows right now... Hasn't been in this range since after ipo 3.5 years ago.
Solarcity is suppress after NV Energy/PUCN Debacle in January (which is currently being sued, contested). Over the past 3.5 years, Solarcity has grown at a 80% compounded growth rate while reducing all in costs over 1/3 on installing long term revenue generating assets. I think their 12 trailing production is 1.5 terrawatt hours which is bigger then some traditional fossil fuel utilities in our country already. By 2019, they will have a 5 terrawatt hour trailing production and a customer base of 1,000,000 customers with 20 year reoccurring revenues in excess of $1bln/year... And that's at a flat no growth rate from 2016 levels... In just he next three years alone, let alone what will happen over the coming decades.
I feel the "market value" premium is non existent. The deal terms must be negotiated if this is to even come close to making sense for a scty investor.�
1/1/2015
guest If you have so much faith in SCTY, then why do you believe SCTY management would allow such a deal to go through?
This is like the least non-hostile takeover possible they could do, they'd have to be fully willing to do it, but not only do it now before supposedly big stock price impetus is on the way.�
1/1/2015
guest By definition, market value is the current price people are willing to pay. You may think the market is grossly mispricing it, and I think you're correct, but it is at market value right now. Elon talked about this on the call yesterday, in response to an analyst suggesting the premium TSLA is paying is too high.�
1/1/2015
guest You know Elon owns 23% of Solarcity, and many of the Solarcity boardmembers are tesla centric investors/employees.
Not even the founders Peter or Lyndon have more then about 5% stake in Solarcity, so the majority of big ownership is tesla centric. The deal will naturally tilt in Tesla's favor, but this is obscenely so.
Since ipo Elon has stated it is extremely undervalued on the market, he had bought hundreds of thousands of more shares in the $40 range and above to prove it.
Lyndon rive just came out with his CEO compensation goals and among the first one was hitting $80 within the next year or so based on the stated gws installed projections among other 2016-2018 goals.
Now Tesla's offering $26? This is an extremely low ball offer that any scty investor that has any history with the company stock action as well as knowledge of company expectations on performance, explicitly Elon and the Rive brothers, would flatly reject on the basic of "current market valuation."�
1/1/2015
guest Okay, if it is what the market is willing to pay, then Solarcity ought to shop around. That's what a market is, not reading a number of stock market value that I can buy one share at that price, we're talking about an entire company with thousands of investors in it.
If tesla is offering $2.7bln, then Solarcity should consider what other offers they can get for the company...
Tesla made the offer, doesn't mean Solarcity investors have to accept it.�
1/1/2015
guest I actually agree with you in the sense that I think the market is drastically undervaluing SCTY at the moment. But so what? "The market" is actually the existing and potential shareholders, and they have agreed on a price ($21.98 as I type), and I imagine there are quite a few of the existing shareholders who will agree to take a 20% upside offer.�
1/1/2015
guest You might be correct, and personally I also value SCTY higher.
However if this deal will not happen now it has been agreed and announced, because it is rejected by either the SolarCity or Tesla shareholders, the SCTY SP might take a very big hit, not so sure how SolarCity will come out of that.�
1/1/2015
guest No they haven't. Solarcity is not for sale as a company on the stock market. Tesla made an offer to acquire Solarcity, not buy shares on the open market. The stock market valuation is just but one of many ways to assess the market value in order to develop offers. But that's not the actual market value.
Actual market value is a multiple bid offer among competing bids and thst has not happened. Solarcity was not even for sale in the first place, tesla technically just made an unsolicited bid. It was their desire, not Solarcity's, so if Solarcity is consider of the bid is fair, they must allow other offers to compete.
Like I said before, if Solarcity were a private company, it would fetch a massively higher "market valuation" based on the books and potential growth, as opposed to the "stock market valuation" which has been severely manipulated based on manufactured fears around short term illegal and unethical actions on behalf of buffets nv energy(which are currently in litigation).�
1/1/2015
guest I don't think TSLA is stopping anyone else from coming in with a better offer - there's just no one else making an offer.�
1/1/2015
guest Tesla made an unsolicited offer. Solarcity is/was not for sale. They are not on the market for sale as a company.
If anyone gets an offer to be bought, and they actually are considering it, they must now examine the actual market value with other offers... And this is if they want to be up for sale.
Solarcity did not say it was up for sale. Tesla made an offer to buy it without provocation.
If Solarcity is actually considering sale now that an offer has been put on the table, they have the obligation to seek out other offers, essentially say they are for sale now and compare bids.
That hasn't happened yet.�
1/1/2015
guest They have no such obligation.�
1/1/2015
guest With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere
�
1/1/2015
guest Soooo... Quick question for admin. After the merger, what happens to this thread?�
1/1/2015
guest As a long time investor in both I see combined value, but separate I see much more value.
Combined, every Tesla owner is a likely customer. Separately, every EV owner is a likely customer.
Combined, Tesla gets the potential 30% ITC on each sale. Separately solarcity manages the debt necessary to extract that value off Teslas books.
Combined, Tesla gets a financial services division similar to Ford's which can capture loan and lease value that otherwise goes to a bank and Solarcity has the warehouses regionalized to handle logistics and installation by their devco.
Today a merger looks like a good pair. 10 years from now it looks like Saudi Aramco with a motorcar/storage tank devision.�
1/1/2015
guest What other measure could be possibly used? Someone can say Tesla is undervalued and some can say Solar City is about to go bankrupt so it's a bailout. Market valuation is the only common ground. Even if Elon and Rive bros agree that it's a lowball offer, there just isn't any other mechanism available to make the acquisition happen.�
1/1/2015
guest Every public company is on the market for sale as a company.
I assume that they didn't engage a banker to actively seek a buyer, so by that measure they weren't promoting to a select group of companies or PE firms that they were for sale.
In this case, we don't know whether or not it was unsolicited. Perhaps the Chairman of Solar City approached the Chairman of Tesla and said "you know that idea we kicked around a couple of months/years ago? Maybe now is a good time".�
1/1/2015
guest Shared partnership on the SolarCity DevCo would be a smart compromise.�
1/1/2015
guest In that case, Elon spoke to Elon and here we are today... He's the chairman of both companies.
I don't doubt Elon spoke with his cousins at one of their family vacations they take together, probably one of their hot tub talks where Elon was allowed back in by not talking about AI and focusing on Solarcity-tesla future.
But legally, Solarcity is not for sale and tesla came to them with an offer.�
1/1/2015
guest Yea, but Elon and other TSLA-SCTY joint holders aren't voting here.
So why would the SCTY-only shareholders vote for this acquisition if it's really as bad as a deal you say, with supposedly such big factors coming up for SCTY's stock price?�
1/1/2015
guest Solarcity just made it through almost a year of major political/regulatory challenges in Nevada, California, New York, Massechusets as well as the sudden ITC extension which made it difficult on predicting how the growth projections and quarterly numbers in my opinion.
This year they are solid with many of their major markets and the regulatory environment and this ought to continue through the next 2-3 year period. This next three year period is where energy storage and smart inverters get deployed in mass so Solarcity will have a massively more diverse portfolio that can make money off of each install in their portfolio. They will have net metering only customers, grid services customers with smart inverter, and grid service with customers that have smart inverters and energy storage... All of which Solarcity will generate revenue from energy sales to the customer itself, revenue for grid services for utilities, and total package micro grid application including management.
Solarcity's primary challenge has been the resistance of incumbent monopolies in the regulatory arena to allow them to compete at scale for consumer business and this has generally revolved around net metering and interconnection speeds/process.
For example you don't need a permit for an oil Derrick in California, but you need many to install solar on your roof. Solarcity said if they had the same permitting/interconnection process as Germany, they could literally meet a customer, design the system, install the system and interconnect within the two days. But that's not the case and you have long backlogs waiting for the permitting process and interconnection sometimes months at a time.
Solarcity is making big strides in getting state commissions to realize the value of solar and as this happens greater volume and market penetration happens at significant growth rates.
Solarcity just entered some regulatory stability and I expect them to take advantage of it after the past whirl wind year... On their own...�
1/1/2015
guest Brexit...
If dollar strong Solarcity wins big buying its Chinese/European panels which is the vast majority of its panels right now.
It important to note Solarcity is an American company with most all its installs happening in the United States (with some commercial happening in Mexico). Not much international business exposure to this event.
If this does affect the us economy, interest rates most likely won't get raised which is a tailwind for cheap finance in the future. Also, consumers may more likely to continue to choose lease/ppa to save on monthly energy bills under favorable net metering arrangements While limiting loan debt and increae home operation savings during austere times.
Strong dollar, low interest rates, stable policy in key markets, and US only business exposure bode well for Solarcity business if this Brexit affects our economy this way.
Now the stock...�
1/1/2015
guest "Tesla Solar"�
1/1/2015
guest From what I've read, the key issue is volume. They'll convert into TSLA1 options, and these TSLA1 options will become *very thinly traded* after a merger. If you were holding to expiration or planning to exercise, no problem.
If you were planning to sell (...or buy back a short options position), you are going to lose out because the bid-ask spreads will be even larger than before and the market makers will make even more money off of you.
A SCTY option to buy 100 shares with a strike price of $80 would convert to a TSLA1 options to buy 12.2 (or 13.1) shares of TSLA for $655 (or $610) per share. Do you think that'll be worthless?�
1/1/2015
guest This looks like a positive development for Solar City as it deals with unfriendly regulators and utilities in Nevada and some other states:
With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere
GSP�
1/1/2015
guest WTF???
Adding this bunch of backroom paper shufflers to TSLA??
SCTY only functions in (is a creature of) States with legislatively-provided tax breaks etc and then farms out the jobs to installation contractors. Ok, value being added and all that, but nothing *real* here to see. What does this have to do with making cars/batteries/power_devices? I see this as a massive economic misstep.
. . . climbs down off high horse.
--
�
1/1/2015
guest What are you talking about? Solar City installs panels. Kinda ruins your argument.�
1/1/2015
guest One can easily see Tesla as a battery producer that happen to use part of their product in cars. In the absence of net metering it makes _a lot_ of sense to combine the battery business with the home solar business.
The stock price changes clearly deem this a bail out, but there is an additional, technically sound reason for Tesla to take over Solar City. But given the economic strength of the two companies, I think it is safe to say that Elon Musk is up to yet another risky move.�
1/1/2015
guest Solar City installs panels. [JoNo]
Photo or it didn't happen.
--�
1/1/2015
guest @jhm What's your take on the offer?�
1/1/2015
guest I was thinking about Elon's view of the world as it relates to this synergy he sees. Suppose you own this state of the art car factory, happen to prefer vertical integration and you wanted to design, stamp out and possibly even custom paint trim pieces, decorative corners, conduit or control boxes to beautify these new Silevo panel installations. Maybe it's something else, like the machines that make the machines optimization has to be going on also designing at the Riverbend factory...or perhaps he wants to use an engineering team or software design resources on SolarCity products? I can see the operational frustration when trying to allocate resources. I found it most useful to think about from the product oriented or finance perspectives and think like a guy who owns all the tools but can't use them together seamlessly and why it makes perfect sense to Elon from his birds nest.
http://www.nytimes.com/2016/06/24/business/energy-environment/testing-the-clean-energy-logic-of-a-tesla-solarcity-merger.html
�
1/1/2015
guest Obviously the question was meant as part of a wager the merger does not go through.�
1/1/2015
guest �
1/1/2015
guest Again, wellinghoff is a former FERC chairman now working for solatcity. The current incumbent utiltiy regulatory framework is the biggest obstacle to accelerated growth for Solarcity and now they have one of the most respected individuals within that framework on Solarcity's side changing it.�
1/1/2015
guest Not true.
If a majority shareholder of a public company refuses to sell, for any reason, such as keeping it in the family, for sentimental reasons, because they don't like the potential purchaser, etc., etc. (all of which happen) how do you force a sale? Majority shareholders can't be forced to sell shares in publicly traded companies, as you seem to think. Of course, Corporation Acts in most jurisdictions have oppression remedies for minority shareholders but there's no guarantee the Court will conclude that decisions not to sell by the majority are oppressive to minority shareholders.
Also, although a fairly rare occurrence, large investors (such as hedge funds and mutual funds) that are against a buyout have been known to actively reach out to enough investors to gain control of more than 50% of the company's voting stock and thwart a sale, in which case, the subject company is also not for sale.�
1/1/2015
guest I'm Using that " logic", nothing is for sale.
I can go into a store to buy the doggy in the window, but the store owner decides he doesn't want to sell it to me. So the dog was never for sale.
Or I could want to buy a model X and the Ceo decides he doesn't want to sell it to me, so that means the model X is not for sale.
besides, no one said anything about forcing a majority person to sell, the point of the acquisition is to offer a substantial premium to get them to want to sell.�
1/1/2015
guest So we closed just above max pain, then fell down just below after hours. Does after hours stock price on Friday affect whether or not an option is in the money?�
1/1/2015
guest I think tftf could explain this to you real clear�
1/1/2015
guest Hey all,
Quick question. How does the conversion of SCTY stock to TSLA work. Tesla announced that the offer was to convert at 0.122x - 0.131x of Tesla shares. Is this dependent on the fluctuation of TSLA stock price or is that locked in presuming Solar city accepts that bid?
Does that mean that at $22/share coverts into TSLA stock at $181? (assuming 0.122x)
Is that right? Help me out here. (I'm a beginner)�
1/1/2015
guest Potential for conflict of interest here is pretty darn high and it's a fair discussion as to how many of the board members should recuse themselves. If you take out all the connections and overlaps you're basically left with one person on the SCTY board and one person on the TSLA board. Interesting article on Bloomberg today in which they included this graphic:
![[?IMG]](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iPl0yhPKu2ns/v2/-1x-1.jpg)
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1/1/2015
guest "Close ties among board members may raise questions with investors"
Very true.
And I suspect, evidenced by the same graphic;
the inevitable answer to those questions (after a lot of contentious opinion),
will be another question;
Why were these entities ever considered to be different companies?
The obvious answer--, they never actually were...�
1/1/2015
guest It means they haven't really decided on the conversion rate yet. It could change before the final offer.�
1/1/2015
guest So JB is going to represent Solarcity's interests in Tesla's buy out of Solarcity... Yeah, these deal terms are going to be fair to Solarcity shareholders. And not too confident in tesla centric investors Nancy and John. Although, Nancy did try to make a public effort to promote Solarcity a few times in the recent past.
Overall, this is a CF for actual representation of Solarcity shareholders interests.
Again, love the merger, hate the deal.�
1/1/2015
guest By the time this completes it may be more merger than acquisition.�
1/1/2015
guest I really want to hear the Solarcity board and the CEO explain to Solarcity shareholders how this is a great deal.
I want them to explain to scty shareholders how this valuation is better then how they see their valuation 2-5 years from now on their own.
It's severely hard to justify in most scty investors minds since there is long standing documented evidence as well as recorded statements of both Elon and Lyndon Rive saying market cap was significantly under valued when it was over double current offer price from 2014-2016.(and even at Ipo 2012 where he considered 18 undervalued in media interview!)
As an example, Go back to q3 conference call and the last question on the conference call asked how frustrating is it that the stock in the 30's was way undervalued and Lyndon replied with frustration I don't know, I wish I knew.
Undervalued has been a constant theme for about two years now, and now that the stock is in a multi year low trading range and all the sudden solacity management says this deal is great for shareholders?
Elon, don't smack down your scty shareholders, give them an actually fair valuation please.
For those long term holders, I think an attractive convertible bond would be widely popular if you want to limit dilution. Work with the scty shareholders who know the long term value of this company.�
1/1/2015
guest Simple. Tesla is going to be a $1 Trillion company when all is said and done. The TSLA shares you get in exchange for your SCTY shares will garner you way more money than your SCTY shares ever would have.�
1/1/2015
guest Maybe WAY long term. The 52 week high for SCTY was roughly triple current sp and arguably a cash flow positive squeeze had some chance of pushing it up higher, but 52 week high for TSLA was only 50% higher than current. Put simply I would stand to make more money in the next couple of years with SCTY than TSLA. Given .122 - .131x conversion TSLA would have to shoot up to $700/share for me to make the returns I was looking at with SCTY to $100. Neither is guaranteed but one is a hell of a lot more likely at least by the time the Model 3 ships.�
1/1/2015
guest I think this is highly relevant to the future of SolarCity (from February 18th)
SolarCity Kills Its MyPower Loan Product
This article implies that SolarCity is already making a pivot away from highly structured finance deals to simpler bank loans. As a Tesla stockholder, this is what I *want* them to do to convince me that the merger is a good idea.
�
1/1/2015
guest This actually was a successful year long loan program just not one that opened the market like they wanted. They tried to make it like the ppa/lease program, but the 30% ITC balloon payment(and the application of the ITC in general) didn't push the "own the equipment" market further. They did successfully do an investment grade rated mypower ABS, but this fund wasn't going to grow big enough fast enough to be sufficient capital raising vehicles as well. Innovative, but complicating and time consuming as well.
They now have a more traditional loan program in 14 states. We'll see how this develops, probably see some numbers in q3 and q4.
The financing generally goes like this:
Revolver debt(like a credit card) and "solar bonds" to pay for projects in construction.
They bundle a large number of installs for investors to own a piece of it in order to take advantage of the 30% ITC, aka Google has a big tax bill, takes 30% ITC from Solarcity installs and applies to said tax bill.
Solarcity takes the tax equity capital from Google and buys more systems.
Once these systems are installed and generating monthly revenue, Solarcity then packages those monthly revenues through asset backed securitizations. since these rates are sub 6%, they use this capital to pay off tax equity(which is 9-12% rates), debt, as well as invest in buying more systems.
As solarcity grows, more installs are installed, and thus bigger tax equity or more frequent tax equity capital is raised, and the process continues to more growth and more installs.
That's pretty much outside any equity raises as well.�
1/1/2015
guest Anybody know what happens to SCTY LEAPS now? I think the merger is probably a good idea for the two in the long run, the Rives have done a great job but I think SCTY has gotten big enough that Musk is probably better suited for the job now. But not sure this is gonna be a good thing for the LEAPS.�
1/1/2015
guest New York utilities and solar companies compromise on price of solar energy sold to utilities - The Buffalo News
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1/1/2015
guest That's my state! I happen to live in an area with increasing power demands and poor grid interconnects, so they should pay well for solar under the new model....�
1/1/2015
guest There needs to be some kind of nationwide FERC intervention to push the whole nation to a more free market model. Lock in net metering for 1-5 years where appropriate, lock in grandfathering and force the state regulatory bodies to do their job(creating a transition plans).
It's embarrassing how poorly we're handling this as a nation, Germany took all these steps with ease 4 years ago. It cost them nearly nothing, and they've had a mature $2/W install industry ever since. They've more than paid back any net cost with their current net export levels. Obviously their energy market is wildly different than most in the US, but the economic principles are the same.�
1/1/2015
guest Well, I've been on vacation, sipping wine along the Russian River.
My SCTY position is about 10% of the size of my TSLA position, which is in line with the offer. So this makes me indifferent to the valuation of SCTY. That is my allocation is in line with the post-merger combination, so even if SolarCity is undervalued in this deal, I suffer no loss of value in the combined company. Understandably, SolarCity investors who are much more heavily exposed to SolarCity than Tesla will not be so indifferent to a potential undervaluation. I can sympathize with that, but my eyes are more set on the prospects for the combined company than the pricing of the deal.
I think that the combined Tesla - SolarCity company will be a force to be reckoned with, the most important energy company going forward. Naturally, both companies are premised on transforming the energy status quo. They face numerous structural and policy oriented obstacles. This is not about growing out two promising companies in established industries. This is about kicking multiple entrenched industries out of their respective comfort zones and transforming energy infrastructures. Thus, it is enormously beneficial that Tesla be one strong, unified entity with some real economic heft.
Consider the debacle in Nevada. State politicians bent over backwards to attract Tesla's Gigafactory, but allowed utility politics to evict SolarCity from the state. Would this have happened had Tesla and SolarCity been one company? We may never know, but why would Nevada want to ruin its relationship with one of the state's most promising employers? So I think that being a combined entity may matter more than we know.
Clearly SolarCity wants to negotiate deals with utilities to provide grid services. And utilities, like NV Energy, are to work with Tesla to get Powerpacks. Imagine the irony of NV Energy trying to cut a good deal with Tesla after its anti-competitive mistreatment of SolarCity. The combined Tesla-SolarCity company will wield substantial bargaining power in negotiation with utilities. And this may be essential for restructuring the power industry.
On a technical note, as related, but separate companies, Tesla Energy could not favor SolarCity over utilities or other solar competitors. They would have had to offer comparable, competitive terms selling Powerwalls and Powerpacks to all of SolarCity's competitors. However, as a combined entity SolarCity will have access to Tesla Energy products at internal costs. It is striking that Tesla upped the price of Powerpacks from $25k to $47k recently. This is what utilities will have to pay, while as a subsidiary SolarCity will have access to much lower internal prices. Thus, as a combined company, Tesla will not need to accept any offer from utilities that might advantage that utility over rooftop solar within their service area.
I am clearly biased in favor of distributed power. My expectation is that the combined Tesla will emerge at the most powerful player advancing distributed power. The negotiating power that the merger creates is well worth the deal in my view, and it is timely to do this combination before Tesla steps out to negotiate new factories with states and countries.�
1/1/2015
guest Inside the Deal That Shaped San Diego County�s Power Picture | The California Report | KQED News
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1/1/2015
guest Glad to see you back, refreshed after your tonic! Just a minor pit to nick: an order of magnitude off on the Powerpacks.
Apart from that, agree with your analysis.�
1/1/2015
guest Thanks. Not sure what pit you are nicking. Tesla's design tool still has 1 Powerpack at $47,000. Is there something I'm missing?�
1/1/2015
guest No, sorry. I missed the suggested denominator of 100kWh, is all I can say. Retracting the picknit; the rest stands.�
1/1/2015
guest Since when?
What exactly prevents them from offering different deals to different companies?�
1/1/2015
guest I was getting ahead of myself thinking of Regulation W, which applies regulations around banks and their affiliates. So that does not specifically apply outside of banking. Even SEC defines various forms of affiliation that apply to public companies. So there are SEC rules that apply to issues between affiliates. Deals with unrelated parties have less scrutiny. Also the US tax code defines affiliates and applies special tax rule. I am not sure what specific rules presently apply to the relationship between SolarCity, Tesla and significant parties.�
1/1/2015
guest
So nothing then
Partnerships happen all the time in business and to use this as a rationale for the acquisition is silly and harmful in that it raises doubts about other valid reasons like adding,"But with Scty we can also cure male pattern baldness"�
1/1/2015
guest This is another great person for the Ignore feature.
In other news.....Obama/Canada/Mexico talking 50% clean energy by 2025 up from 37% last year? Wild.�
1/1/2015
guest Yeah BMW dealers have partnered with SolarCity to offer EV solar bundles. Have never heard of it before so don't know if it has been a success or flop.
BMW Partners With Solar City To Offer Solar + EV Bundle�
1/1/2015
guest I tend to get overly excited when I see something positive on the horizon and then the markets(and SBenson) slam me back down to reality, BUT..........I'm starting to think this bold Elon plan might work. If this merger becomes truly inevitable AND the market finally gets a realistic picture of what a combined SCTY/Tesla Energy might look like AND there are some decent number from the 2Q report......this purchase offer might spur SCTY on to fair valuation.
I don't know enough about publicly traded company dynamics to guess what that does to the merger, but either way the "threat" of merger may be enough to finally push through a more forward-looking valuation.
For fair valuation the algos MUST cross a tipping point where they recognize revenue realistically and that's probably a long shot in the near term. Execution through 2Q is obviously a MASSIVE question mark here, but the bar is so damn low now that very minor operational manipulation could juice the numbers for the algos. Take on more large-scale commercial jobs, etc.....
Did we decide if the shorts will be prompted to return significant chunks of shares for voting purposes? If that's the case then there's a lot out there to squeeze this stock many times over from now until Thanksgiving.
SolarCity: Merger with Tesla �Inevitable,� Says Avondale; Irrational, Says Axiom
Tesla-SolarCity Merger 'Inevitable,' May Rival Apple, Google, Uber
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1/1/2015
guest I think you miss the point of what affiliate is and why it poses potential conflicts of interest. Suppose Tesla were simply to sell batteries to SolarCity at Tesla's cost. This might be something that Musk and parties deeply connected to both companies might wish to do. However, this poses a conflict of interest against the best interest of Tesla shareholders. It would constitute an unfair transfer of value from Tesla shareholders to SolarCity shareholders based on personal interests of key officers. This is the sort of conflict of interest that the SEC and other regulatory bodies rightly monitor.
But let's step aside from the ethical and regulatory issues, which I will concede are not an essential issue for this transaction. The deeper issue is economic having to do with the value of being vertically integrated. As distinct entities, Tesla can build a battery and sell it to SolarCity at some margin above cost. SolarCity in turn sells the battery at some margin above cost. To separate entities collect separate margins on the same product. There is nothing inherently wrong with this relationship. Is it possible to provide the same product to the end customer if Tesla and SolarCity are a combined entity? Yes, the total cost of delivery can be brought down. This is possible be not necessary. The risk of competition driving down costs either for battery producers or installers is also mitigated. That is, suppose competition among producers became so high the Tesla's margin as a producer is squeezed. As a combine company it may still be able to earn a strong margin as an installer. Alternatively, installer competion could wipe out SolarCity's margin, but as a combined company Tesla still earns a strong margin as a producer. One cannot know well in advance what links in a supply chain will suffer margin compression, but an integrated company has the advantage to make up for this in other segments of the supply chain. So mitigating this risk can be advantageous to shareholders of an integrated company. Moreover, this can also help keep the cost of capital low.
Clearly, Musk is a strong believer in vertical integration. I belive this is the dominant motivation behind this transaction. As a side benefit, combining companies may also avoid any potential conflict of interest arising from affiliation. If Musk really wants to run the two companies as if they are one enterprise, then I think they should be properly combined so that one body of shareholders enjoy the benefits fully.�
1/1/2015
guest I *think* they would run into some regulatory issues for the uneven pricng...perhaps FERC or a wild PUC...just as NV Energy and others already have. I'm not certain if it's illegal but I think for Elon it was bordering on unethical or unseemly even...remember even family pays full price for a Tesla after all.
FERC revokes market-based rate authority for Berkshire Hathaway companies
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1/1/2015
guest Just because someone got ahead of themselves and confused regulations is no reason to ignore them. At least they admitted their mistake.
BTW, other news is for other threads.�
1/1/2015
guest Tesla is not a regulated entity and can have uneven pricing and decide who they sell to at what price. Remember, this is the company that decided not to sell a car to a person because they didn't like them. LOL.
If Tesla wants to sell batteries at cost, or at a loss for "strategic reasons" or "reasons", as an unregulated business they are totally free to do so. It has nothing to do with the SEC or other regulatory agencies. Do you think Panasonic gives the same terms to other companies as they do to Tesla?
However, if the shareholders decide that the CEO and/or the board is breaching their fiduciary responsibility through self-dealing, they are the ones to bring an action. Legally, they are the ones who have standing.
To prevent that, the CEO would do exactly the same thing: disclose to the board all of their interests, present to the board the strategic rationale for providing the batteries at cost, recuse themselves from a vote, have the board approve/disapprove the deal. All that can be done without having to buy the company which has a much larger conflict of interest due to the size of the deal.�
1/1/2015
guest SCTY valuation is suppressed by the insanely complicated number of different types of financial structures they've set up. It's an "informational discount". There are two scenarios after the merge:
(1) Tesla unwinds most of these financial structures and reduces SCTY to one or two financing methods. The valuation of SCTY will go up.
(2) Tesla leaves in place the dozen different financing schemes. Tesla will trade lower by inheriting the "informational discount".
There are, frankly, too many different financing structures at SCTY and too much corporate complexity. It makes it impossible to analyze financially except in the crudest of ways. The crudest of ways says.... they're losing money and they have too much short-term debt which needs refinancing. This might not be correct, but it would be necessary to detangle the accounting to figure this out, and I certainly can't detangle it.
For example, SolarCity has some supposedly-non-recourse bonds backed by assets of "a subsidiary", according to the annual report. Which subsidiary? Whether these are *really* recourse bonds depends on *exactly what* the subsidiary owns, which isn't documented. If they're backed by the Silevo factory, for example, SolarCity is essentially obligated to bail the bonds out.
SolarCity seems to be using all three major schemes for monetizing the ITC (two of which are way too damn complicated; the sale-leaseback is OK), multiple types of joint ventures, and god knows what else.
On the consumer end, the original MyPower loan design was too clever for their own good, and frankly so are their PPA contracts. Leases are complicated enough to analyze! There isn't enough information on lease terms disclosed to investors either....
Merger "infects" TSLA with the "informational discount" on the valuation of SCTY. Only way to fix this is to clean up SCTY's books by unwinding the more complicated transactions, until the company is simple enough to analyze. Only way to do that is to get some simpler, cleaner financing. From the customer side, bank loans financed in advance are good. Leases which are sold as ABS are OK. For monetizing the ITC, sale-leaseback is the simplest and should be the only one used. SCTY has been doing *much more complicated transactions*; this quite rightly creates investor suspicion that there are hidden sources of losses which are not obvious, as there were for the banks in 2008.�
1/1/2015
guest There's a bit of truth in there, though I still think 90% of the problem is sales cost stickiness that was unforeseen and is uncontrollable industry wide(in the US).
Radford Small joined SCTY last year as head of investor relations and was made head of global capital markets 5 months ago. IMO he is the smartest guy in the room when it comes to creating the kind of financing balance you're looking for. This product is going to be convoluted in the short term, but there's no reason it can't be more transparent.
I'll have to dig back for the details, but the investing public seemed more please with the last major round of financing(that I assume he designed). He pushed the monetization out to all 20 years of the contract payback period and took as much off the books as possible. Obviously this needs to be the trend if SCTY is going to keep growing at 50%-80% every year simply because the amounts of cash needed will be astronomical.
As of now the friction in the model due to costs is going to keep them from expanding as much as they'd like, so the TSLA umbrella makes sense. Borrowing costs instantly plummet allowing for expansion to ramp back up and at the same time sales cost can be slashed in half by mandate. No more door-to-door, shift to something like Elon's commissions for Model S referrals and you save millions. Remember, a typical PPA contract takes $4-5k in sales effort. I think we're at a point where $1k can be spread around in commissions to existing customers and sales will only increase while cutting sales cost in half.
Those two changes instantly make the model fluid again and you're cash positive moving forward. My question is, if the merger becomes inevitable where do these new inputs reside in the algo world? Most likely that world sees the merger as a necessity, but what if there's a decent 2Q report and then a straight up good report for 3Q before the merger is official? Surely a jump back up toward $50 nixes the deal?
I don't understand the financing scheme well enough to know if they're limited right now on how many installs they can make. I do know that if they made a plan to juice the numbers say in February when the stock tanked to $17, they could easily destroy their install guidance targets either quarter.�
1/1/2015
guest This is extremely helpful information.�
1/1/2015
guest Does that happen before the merger? Musk wants to finish the merger in *three weeks*!
Maybe your scenario is exactly why Musk wants to finish the merger ASAP, before SolarCity has a chance to jump in price? (It's certainly not a sure thing that it would jump in price -- I certainly can't predict market behavior -- but if it *might*, he might want to close the merger before there's any chance of it.)
This is one of the more frustrating aspects of the overly-complicated financing -- the inability to tell.�
1/1/2015
guest I want to be clear that I'm not implying anything super rosy here. From the start this has seemed to me a step Elon felt was necessary, not some kind of value buy(though it is a huge bargain). SCTY is not functioning properly due mostly to external factors that are pushing them around. Under the TSLA umbrella most of those problems go away and Tesla Energy would be the one doing the pushing.
I don't think Elon anticipated needing to do this or really wanted to do it, some things become necessary to maintain "the vision". Proposing a sale sets a price floor and squeezes the shorts, to me this initially felt like buying time and breathing room for SCTY. All they needed to do is get to Thanksgiving and it's all good. This kind of does that and brings some much needed free publicity.�
1/1/2015
guest From the news coming out Nevada, it looks like grandfathering will be reinstated in 2017, at a bare minimum.
In addition, New York is maintaining net metering into 2020, and California thru 2019. Among a handful of key states that have extended net metering. We've entered a stable net metering period of 3-4 years.
Lyndon rive expects to exceed 2016 CAGR, hinting at a return to the 40% CAGR target in 2017, which would put them at 1.4-1.5Gw/year goal.
Solarcity's new loan program has opened up *three new* additional markets expected in play by fall.
Grid services are anticipated to start up as the wholesale markets have opened to DERs now in California. And as announced at q1, Solarcity now has 100mwhs of energy storage under management now by which to offer these services. I imagine, we should see an interesting product launch of powerwall 2.0 and the public announcement of grid services in action.
Also, important to note, Solarcity was actually cash flow positive for q1 outside of 40mln put into the buffalo factory.
2016 revenues are expected to be around $600mln. 2017, ~$1bln.
The clear trend to watch is if Solarcity recovers bookings momentum. Already reported that they have seen a 25% month over month increase since March, so momentum appears to picking up again post Nevada atrocity.
Solar Bonds don't *start* coming up until next year and revolver debt in December 2017. And convertibles start in 2018.
2016 1Gws $600mln rev
2017 1.4gws $1bln rev
2018 1.96gws 1.5bln rev
Also, all in cost $2.25/watt by YE 2017 which is yields a $1/watt reference the Hancock 3.35/watt valuation of full asset monitizarion as base line.
Overall, most key markets are now stable and the momentum has no indication of not picking up streadily to achieve desired growth. The grid services revenuene stream will be kicking off as well as silevo ramping production and powerwall 2.0 sales/leases/ppa packages into 2017.
As Elon said, Solarcity will get ahead of any net metering issues over the course of the next two years, so much of he Nevada type events will be limited to non existent moving forward.
Under these conditions, Solarcity is moving into a strong post-q1 environment where the probability of meeting a debt covenants while maintaining CAGR is high.
Ps, the regulatory eye is on Arizona right now, however, the ACC is not recommending the dismantling of grandfathering so a repeat of Nevada is extremely low. They are focusing on demand charges and a three part rate...�
1/1/2015
guest All these trends are great and the numbers plan is what needs to happen, but the execution has not been stellar over the last 9 months. The headwinds are absurd, but from an investor's perspective that's no excuse. We can't chalk it all up to Nevada because crap like that should have been foreseen and baked into the plan.
The thing I'm looking at is the projected organic growth of solar for 2016. We're set to install something like 14.5GW in the US this year which is nearly double what was done last year. A LOT of that growth will be utility, but SCTY's guidance has been pushed so low that they should be able to destroy their 2Q and 3Q numbers.
I'm not too confident that priority has been put on doing that, but it's certainly a 50/50 possibility.�
1/1/2015
guest Another tailwind for solar generally is that the price of natural gas is on the rise. It is now quite close to $3/mmbtu, up from below $2/mmbtu earlier this year. Coal consumption is also up 29% from a year ago in response to the increase in natural gas.
So both the economics and environmental advantage of solar look better as the price of natural gas climbs. So this can impact utilities to invest more heavily in solar and wind.
As for behind-the-meter solar, fuel prices generally get pushed out to rate payers. So we should expect retail utility rates to continue to climb. The expectation of ever increasing power bills is very good for PPA-oriented solar installers like SolarCity.
In reality, we should not expect that natural gas can remain at prices as low as $2/mmbtu. This is a price level at which major gas players like Chesapeake go bankrupt. The supply of natural gas is highly dependent on the price of oil, as natural gas is largely a low value byproduct of exploring for oil. So as drilling in the US continues to decline, gas supplies can become tight even before the price of oil fully recovers to $70/b or higher.�
1/1/2015
guest Solar plus storage: With SolarCity deal, Tesla aims to speed clean energy transition
There is a clear emphasis here on offering tightly integrated products. We might do well to consider the possibility that the future for SolarCity is more about product than PPAs. This is a substantially different vision for the company that what most critics have in mind.
This quote highlights my concern that the two companies are already so tightly connected that to operate at an arm's length basis is an impediment to product integration and coordinated marketing.
Note that the combined Tesla-SolarCity company would be extremely well positioned to package Kauai-like plants for utilities. The combined company would have nearly all the hardware produced in-house and tightly integrated. The sale effort would be seamless. This all combines to offer fully dispatchable solar plants at the most competitive prices. I see such a package as competing directly with gas peaking plants. The Kauai plant has a 14.5c/kWh PPA to the local utility. I wonder what an integrated Tesla-SolarCity PPA could come in at. Could they shave an extra cent or two off of this? That would be very compelling in a market where the levelized cost of gas peakers is in excess of 18 c/kWh.
It's all about accelerating sustainable energy.�
1/1/2015
guest
Nevada wasn't foreseen to retroactively change grandfathering contracts with solar customers. If anyone foresaw that, then Solarcity wouldn't never entered the market nor would Nevada would have given millions in incentives to Solarcity to come to Nevada to do business in 2014.
What is clear is that the regulatory and permitting issue are the single greatest area of risk management and over the last 9 months they have become more then tested in that area.
Since then, they've hired Jon wellinghoff, a former chairman of FERC *and* a former Nevada PUC commissioner.
Also, they've sponsored peer reviewed studies on net metering benefits as well as have had supporting net metering benefits studies come out that were non sponsored by them.
They have unnamious support for grandfathering from Harry Reid and the governor of Nevada who didn't expect the PUC to make the grandfathering decision and has commissioned a task force to develop a solution. They've also received the required 100k citizen signatures for the net metering ballot initiative to go to vote in November.
They're also directly involved in developing the grid services policy in California and New York which is turning out to be the standards for how the rest of the nation will proceed with a rooftop integrated grid that compensates utilities for purchasing services from Solarcity, which would eliminate the conflict between utility and Solarcity completely. There would be no policy problems at that point, even permitting and inspections would begin to streamlined(soft costs) to Germany levels
And that would truely put the pedal to metal on compounding growth like we've never seen before.
Let's just see how momentum is returned over the next two quarters, q2&q3. I think that momentum back to booking levels going into q4 should help indicate whether they will compound at 40% and reach target cost reductions going into 2017 or have to maintain 1gw install guidance to in order to cut costs to meet costs targets. Again, regardless of how you see financing health, these installs have tremendous value and are cumulative revenue streams over 20 years. Solarcity has been in business for 10 years with these contracts accumulating over 350k customers and they have a 10 year history of receiving over 99% of their payments on time. Thst is an astounding asset class for any investor out there looking for this type of quality and predictably.�
1/1/2015
guest If the merger goes through then there are instantly no problems, I am 100% confident of that. The concern is if the merger does no go through for some reason.
It feels like this model needs to be fully humming in order for it to operate. Slowing down ahead of a looming ITC stepdown threw the whole thing off kilter and opened the door for something like Nevada to have a real impact. They can get out of this muck outside of the merger, but it'll take a while to build that momentum back up and get costs down.
Initially I hoped this move was a ruse to set a 3 month price floor, now that I see the potential rebranded end-to-end offerings it makes a lot of sense to bring Tesla Energy entirely under one roof and just dominate. I think it actually helps differentiate the car brand as much as it helps solidify the solar brand.
The "whole package" will be wildly popular when the Model 3 is up to scale. One phone call to get a solar PPA(+storage) and brand new 3 for probably less than you were paying in electric bills and car payments. Sick. Imagine the offerings they can make to existing Model 3 reservation holders when there's no real sales cost. Buy a system for $2.45/W with production guarantee and American made high-end panels.
So much for my far-out LEAPs! At least my new TSLA shares should triple in time.
Edit to add:
That's the biggest mystery to me, I assumed these assets would ramp up instantly as the PPA became mainstream and become the next big thing for banks. There's literally almost zero risk here and yet the yields are massive. Today's SCTY PPA is certainly more secure than the average mortgage in some markets, these people are either rich with 740+ credit scores or Musk disciples.�
1/1/2015
guest Again, they are still averaging below 5% on abs across the entire abs offering group, and before the Nevada buffet attack, they were working their way toward 4%.
It's clearly the default risk whether perceived or not, had given leverage to abs investors at that time. To me, institutions can see the numbers and know these are attractive vehicles. It's just a matter of making the most money from them as they are a new asset class and leverage is available in negotiations.
I feel now, those negations will shift as clarity among Solarcity markets related to net metering and grandfathering policy has stability and continued commitment.
In addition, some interesting leverage will materialize for Solarcity as grid services are unveiled since now, one system will have multiple revenue streams and will be contracted woth regulated monopolies of the grid. As this grows, I have a feeling it will get the best yeilds on the market and litterally fall well below mortgage rates for massive abs offerings as well as tax equity investors and others...�
1/1/2015
guest This is what makes me positive about the deal. I'm probably seeing what I want to see, but I found a number of pieces of evidence which indicate that SCTY is moving away from the direct-financing model and towards a product-sales model. The new financing guy; the refinancing of old deals as ABS which are much more comprehensible; the push to do bank loans which are financed in advance; and of course the effort and money going into the Silevo factory and into cutting "hard costs" of installation.�
1/1/2015
guest Is there actually any evidence that that is true?
Complicated structures can also result in an "information premium" being paid due to some variation of "trust" or "it seems right" or "confidence in how they present their numbers and plans".
Obfuscation and complexity are tools as often as they are hinderances.
Ask any Enron, Worldcom or Madoff investor.�
1/1/2015
guest Key events: California will now be without nuclear power. Basically, the end of base load which signals the end of the California grid as we know it. This also lifts any curtailment of solar during peak. Floodgates have been essentially open to renewables to take over.
The End of the Era of Baseload Power Plants
Second, California iso now is allowed to aggregate rooftop solar.
Folsom�s California ISO leading push for distributed energy resources
Solarcity can now get certified to aggregate 500kw worth of rooftops to sell power l on the whole sale market.
Solarcity currently has 100mwh of solar+storage under management and I feel the big announcement coming is they will be the first to offer these services anywhere in the world.
This is big big news as calISO is quoted as saying the first DER aggregation will happen early 2017. This is estimated(along with other grid services) is a $50 bln market and Solarcity is first mover on it.
Now how can this current offer valuation be considered anything but theft is beyond me.�
1/1/2015
guest There has been great solar panel market news coming, and there will continue to be, but it will always be sweatheart deals, as every PG&E deal ever has been, even cashing out the Enron thieves to the tunes of billions of dollars. There's simply too much favoritism volatility to know the outcome for a particular solar panel company. I'd have to see solid documentation that any particular solar panel company actually has the competitive advantage in the future (which of course is impossible) to overcome a huge debt question, if any, and there's a debt question for SCTY (so double layer bad). Since solar panels are still a developing and researching and competitive marketplace (and thank god for that for that is what is making this all possible), then there's automatically a risk of product obsolescence and any particular entities tied to those product lines, and I would call this a success in the further saving of the world and good clean original sunlight energy "production/generation" (conversion, really), because almost every product failure due to competitive advantage of another product line means better products and a better world for all concerned. Yes, there's huge great news for solar panels in the rather anti-environmental decision to close down nuclear power plants (which before windmills and solar panels became competitive were the only way to get ourselves out of the dirty energy and dirty morals power problems with fossil fuels, and I still and always will maintain that we should have gone full-on nuclear power, but since solar and wind harvesting have improved, now that is no longer true). The politics that follow that decision are nothing short of fantastic: politicians could have signed on the dotted line for a bunch more coal and oil plants, but instead, they said they will replace it 100% with doublespeak for fresh clean energy (they called it "renewable"*, but in fact, renewable is generally dirty, so I find their wording bad). This is fantastic. But, like I said, that doesn't mean that that fantasticness reaches all the way into the particular pockets of a particular entity (in this discussion for example, SCTY).
* Like Elon talking about "physics first" principles, I like to use "logic and math first" principles, and fossil fuels are renewed: they were harvested by plants and animals, and we dig them up and renew them using them again, which is very dirty. But solar panels get their energy from original celestial fusion, and aren't renewed at all: they are the direct byproduct of light energy already coming to warm the earth up anyway, so any heat output we perform with that light is OK (I'd like to see the science on this, since I know it can't be 100% right). I hate it when doublespeak is used to contort topics I'm interested in, so I continue to try to fix the use of this word (abandoning it is the easiest fix; I like to call the respective energy sources "clean energy" vs. "dirty energy").
edit: p.s.: almost all of USA's nuclear power plants produced recyclable energy sources, that can be reprocessed to use again and again; the amount of actual nuclear waste in such a marketplace would be very nearly zero. Only the damn commies who did all of the "GreenPeace" movements about nuclear caused very valuable energy sources to be labeled incorrectly as "waste", and turned into a huge political football. They ruined whole generations of success in our country because of it, so they succeeded. But, now we have solar panels, windmills, and batteries, so for expedience, we can let the death of nuclear power be both sad and move on to stuff we can actually politically install.
edit 2: Conclusions:
So, this brings me to some conclusions. First of all, every product line is a risk, and while I liked packaging product lines into companies separate from other companies they can bring down, there may be an opposite approach of creating an entity that has enough product lines under its umbrella that not a single product failure can bring down the whole company (look at movie companies (which make endless duds along with their blockbusters and so-so successes) and drug companies for some examples, and I'm sure there's zillions of other examples). Is SCTY such an approach? They are only building one factory with one product line in it. Furthermore, their financing is very heavy in one approach. If SCTY had ongoing R&D, a war chest to buy other R&D outfits and intelligence, and factories ready to come to action for new product lines, as well as a healthy mix of financing methods, then this would go a long way to the big umbrella theory. But, putting SCTY into TSLA is more of a diversification than a big umbrella; it's more like a falling apart cheap umbrella that's about to fold over in the wind, and you hope you can hold onto the flaps and failing beams to make the fabric do anything. And meanwhile you get soaked. Hey, if you hold onto the cheap umbrella JUST RIGHT, maybe it works out. I really want SCTY to go gangbusters. But there's a huge huge risk. That's my main question.�
1/1/2015
guest Also to note, since Solarcity's propriety control *software* is set to become *the standard* for aggregation with utilties, they essentially will now be able to enter into contracts with other company's rooftop customers, essentially, Solarcity could be making money off *all* rooftop solar installed in the wild regardless if they are Solarcity or not(once they are aggregation capable) since Solarcity controls are the only certified standard by which doing aggregation.
They essentially are setting up to have control over the entire distributed generation grid as soon as they get their hooks into utilty grid services... And soon they may announce this first mover status as they are set to launch in early 2017 in California.
Again, this is a $50 bln dollar market firmly in sight for Elon and Solarcity execs.
Vision is Well beyond rooftop install company... and that is not even near priced into the current offer to Solarcity investors. Not even close. I guess we know why Elon wants to rush this deal before 2017...�
1/1/2015
guest Ignoring the purely commercial and political parts, as well as your conflation of panels to the energy they capture, it's immediately and basically obvious that any contribution from solar panels to Earth heating is fundamentally zero. Ok, there are energy losses at every stage from conversion to transmission to use of the power captured - but the sum total of all of those exactly equal the energy that came from the Source in the first place and would warm up Earth anyway, by an identical amount.
In simple layman physics terms: QED ;-)�
1/1/2015
guest Not so QED. Solar panels are black, but they cover stuff that used to be yellow, or green, or white, or gray. Basically, they do in fact change the earth's albedo. So some energy that used to be reflected back to space will now stay on earth. I will however agree that this effect is completely negligible, since all the energy we need could be obtained by covering something like 0.0001% of the earth's surface (no, I haven't checked that, but it's about what Elon showed when he introduced the PowerWall).�
1/1/2015
guest Yes, you do have a point too.
Elon once showed a map of the US on which an area one pixel worth of solar receptors could serve the entire county's energy needs, maybe that's the presentation you recall. So even if all those panels were the new and beautiful ones due out from Riverbend, their albedo matters not a lot, I agree.
Peace.�
1/1/2015
guest Blue square surface area current panels required to capture US Electrical power needs;
1 Pixel surface area of current batteries for 24 hour/day power utilization
�
1/1/2015
guest These absurdities used to only exist in the SCTY thread.�
1/1/2015
guest Hawaiian Electric shares fall 8 percent on Ige�s new PUC appointment
Fidelity OTC fund boosted SolarCity stake by 20 percent in May
�
1/1/2015
guest OK, that boosts Fidelity's stake by about 1% of the company's total float vs. the last reported numbers.�
1/1/2015
guest Here's a little math for the Tesla-SolarCity merger.
Tesla has market cap of $28.433B at $212.28/share on 133.94M shares.
SolarCity has market cap of $2.352B at $23.93/share on 98.30M shares.
So the market currently values SolarCity at 0.0827 of Tesla's market cap and a share of SolarCity at 0.1127 shares of Tesla. If an investor holds 1.3627 shares of Tesla for every share of SolarCity, then they own an equal proportion of both companies. It may be desirable to do so as this neutralizes the impact of whatever specific exchange ratio is offered to SolarCity shareholders.
On the other hand, if you believe that Tesla will offer a slight premium for SolarCity relative to the market value of Tesla, then you may want to hold fewer than 1.36 Tesla shares per SolarCity share. It helps to know this ratio of share and that it has nothing to do with the market value of the respective companies. One can decide to be heavy on either company depending on how you see the deal playing out.�
1/1/2015
guest �
1/1/2015
guest The Hawaii PUC change by the governor is significant because the merger decision with NextEra is next week. This deal two years in the making looks like a no go. If a no go, Solarcity is in a fantastic spot to capitalize on grid services as well as potentially a reopening of the net metering policy under smart inverter requirement.
Again, this is another policy tailwind that makes current deal valuation a terrible one for Solarcity investors.�
1/1/2015
guest I honestly don't know why anyone trusts utilities to keep retail costs down.
Minnesota Power tries again for lower industrial electric rates
�
1/1/2015
guest I don't -- and I don't have to trust them. I trust many state PUCs -- did you notice that the report you linked mentions the PUC rejecting Minnesota Power's proposal?
My Public Utility Commission, in NY separated generation and distribution rates. Utilities can't get away with anything on the generation side. It's also pretty hard for them to get away with anything on the distribution side, because rooftop solar keeps them honest.
Consider what the PUC in Hawaii is doing, as well. They are rejecting the attempts of HECO to gouge customers.
I expect that other PUCs will eventually copy what NY did. I understand that some PUCs are deeply corrupt, such as Nevada, but I figure this level of corruption at the PUCs is unlikely to last forever in most states.
When the utilty doesn't have a completely corrupt sweetheart deal with the government, the utility starts acting competitive -- and competitive means they try to keep prices low enough that people don't defect.�
1/1/2015
guest Statement from SolarCity Chief Policy Officer Jon Wellinghoff on the Recommendation of the Chair of the Distributed Generation & Storage Technical Advisory Committee of the Nevada New Energy Industry Task Force
Is Nevada going to reinstate net metering soon?
Looks like if they do, this could affect stock price as the Nevada debacle was the overriding reason of market uncertainty for the past 6 months...
Again, this tesla aquisition deal looking short changed for Solarcity investors every passing day...�
1/1/2015
guest http://www.bizjournals.com/buffalo/blog/morning_roundup/2016/06/new-york-state-could-be-negotiating-with-tesla-for.html
�
1/1/2015
guest New law makes it easier to finance energy co-ops
Warren Buffet Might Be Interested in HECO If NextEra Acquisition Not Approved
�
1/1/2015
guest I guess we know they didn't bother polling one excruciatingly logical soul...
Poll shows majority of Nevadans support rooftop solar � and old rates
NV Energy customers to see another rate drop this week
�
1/1/2015
guest I know Solarcity has historically been focused on residential solar. The stated goal for Tesla acquisition of Solarcity is to provide a retail customer with an EV, solar and battery backup shopping solution.
However, one other thought I had was that the synergy of solar and powerwall solutions seems a more obvious fit for commercial purchasers. For example, MGM and NRG now (although no powerwall that we know of, anybody know otherwise?). Also other Casinos (Wynn and Sands) have expressed a desire to separate themselves from NV Energy. It would seem that commercial customers would stand to gain the most from Solar/Powerwall since most are the primary consumers of peak demand power during the day. I do not know if commercial customers can negotiate better rate terms, but since the big casinos want to leave NV Energy, it doesn't seem that way.
I know Musk had met with the Pentagon, and likely discussed energy solutions for the military. That could be a potential large scale buyer of Tesla/Solarcity products. I can only imagine the list would grow exponentially if Tesla can offer larger scale energy solutions.
Just thinking.�
1/1/2015
guest The post-Brexit world is looking pretty nuts, treasuries are paying next to nothing. In this environment isn't the yield on a clearly safe SolarCitry PPA bond highly attractive?
Does the pending(seemingly inevitable if Elon wants it) merger with TSLA provide enough additional "corporate certainty" to allow the cost of financing to shrink considerably right now? In essence, can we get something close to TSLA rates now?�
1/1/2015
guest Interesting article by David Crane.
TeslaCity: Will car company + solar company = shareholder happiness?
I usually like where his head is with our transition to sustainable energy, but not sure he understands the whole energy circle with Tesla. Here are some quotes:
I agree with this - the market never let up on the company's projections after that and seemed to have forgotten why SolarCity did what it did.
Short-sighted opinion since Elon said at the Annual Shareholder Meeting that Tesla's energy business will probably be at least 50%.....market still ignores this.
Short-sighted again. If you have been paying attention to what Tesla is doing, the energy and solar industry, JB interviews over the years, it's a no-brainer.
I think something like this was proposed on here, but I still think Tesla will make it even better than before with their strategic ideas on the future of the grid.
�
1/1/2015
guest It won't happen, but a reverse merger with Tesla Energy and Solarcity would probably make everyone happy.
Tesla motors would its company
Tesla energy(formerly Solarcity) would be its company.�
1/1/2015
guest Indiana regulators approve Duke's $1.4B grid modernization plan
Ruggiero�s green energy plan now law | www.jamestownpress.com | Jamestown Press
�
1/1/2015
guest The IB rate to short SCTY just hit 211%. Not a typo! What is going on??�
1/1/2015
guest I've been playing with CAISO hourly data from November to present. The more I work with it, the more I come to the opinion that solar will dominate wind in the longrun. I am looking forward to a time when there is sufficient battery storage to smooth out intradaily mismatch of supply and demand. At this point, thermal power is only needed to address energy shortfall, not load balancing. So here are the limitations of wind.
First, daily wind production is quite variable from day to day. Solar provides a more stable supply of daily energy. So with lots of wind, wider regional transmission networks are needed, and multiple days of battery storage are needed to smooth out the supply. So that is a lot more hardware to make wind stable relative to what solar would need at the same scale of annual production.
Second, in California, spring and fall are more productive seasons for wind, though summer and winter are when demand are highest. By contrast solar production varies smoothly through the season with minimum production in January and maximum in July. The daily average doubles from January to July. So if there is sufficient solar for summer and winter, there is more than enough in spring and fall. So when it comes time to balance seasonal loads, there will be little value in having substantial wind generation.
Third, I suspect that wind in California may be limited geographically, but this is hardly a problem for solar. If wind were dominant in the state, it would mostly be imported from other western and midwestern states, but this is simply reiterating the point of dependency of extensive transmission networks.
So far the advantage that wind has enjoyed is economic. It became price competitive with traditional generation years before solar did, and it is still largely cheaper than solar. It also tends to generate a more even supply of power throughout the day, so it may be a bit easier to integrate with thermal generation. But in this mix day to day variation in production is not a huge problem as thermal generators fill the gap. But in a day when there is very little thermal generation and quite substantial storage capacity (> 10 hours at average consumption), solar will be the more reliable supply of energy and better matched with the seasons, at least for California. The situation may well be different for other states.�
1/1/2015
guest Time to call them in?�
1/1/2015
guest All I know is that the rate was around 70% yesterday. Tripled overnight!�
1/1/2015
guest big funds who lend out their shares to short for interest need to recall those shares for voting purposes.
So a fair dinkum short squeeze must occur.
but, its not due to fundamentals, and the bond market consider SCTY itself to be unviable as an independent entity.
Bonds Detail
I've never seen such conviction that a short squeeze occurs on a company that is so reasonably headed for 'extinction'
(ownership by another is extinction, so when TSLA absorbs SCTY, SCTY will be extinct)
blood is thicker than water�
1/1/2015
guest Fidelity presumably has lent out many of its 14 million shares to short. What happens when they recall these shares to vote? Why have most of the shorts not covered their position based simply on the announced intent of Tesla to purchase SCTY?
The large institutional investors in this game have insider knowledge of both companies. I would like to understand better the strategies of both sides. Sentiments of small investors probably aren't influences prices much at this point.�
1/1/2015
guest MGM Resorts International and NRG Energy Complete the Installation of Nation's Largest Rooftop Solar Array
Reminds me of Clean Coal.
Inside Energy Reads: How �Rooftop Solar� Became �Private Solar�
�
1/1/2015
guest Tesla Motors Inc (TSLA) & SolarCity Corp (SCTY) Deal Has Near-Term Synergies Of $156-389 Million
Not sure if this has been posted, but Credit Suisse analyst estimates that near-term SG&A synergies could reduce the cost per watt by 16 to 39 cents.�
1/1/2015
guest This is what I'd like to know. Anyone shorting SCTY at this point is betting very heavily that the merger will not go through, which seems like an extraordinary gamble, given that it's a bet against both companies' management, a bet that "no" voters haven't already sold their stock, and a bet against the single largest independent stockholder (a Fidelity fund) which has already come out in favor of the merger. If you think the merger will go through, and you're totally sour on the business, you would short TSLA instead (much cheaper to borrow and higher priced). Some people are not thinking clearly.
Had I been short SCTY before the merger announcement, I would have immmediately gotten out of SCTY and shorted TSLA instead, just for the arbitrage value. But I don't short stock. I don't know how these short-sellers are thinking, but I can't think of any explanation which makes them rational.�
1/1/2015
guest The only rationale I can come up with for current shorting situation is folks expect a disastrous Q2 from Solar City and are falling all over each other to get in before the drop.�
1/1/2015
guest Good thought. However -- Shorting is almost always a terrible idea because you can usually make a bearish bet with less risk and higher payback using options. So actual shorting is only appropriate if you are being bearish for an *indefinite period* (because options expire). So someone making a bet based on expectations of Q2 numbers should be using options, not shorting -- so shorts are *still* not thinking clearly if your hypothesis is right.�
1/1/2015
guest NV Energy expects purchase of Arizona natural gas plant to bring needed new power
�
1/1/2015
guest �
1/1/2015
guest Kinder Morgan to sell 50% of gas pipeline to Southern Natural Gas | OilPrice.com
So Sothern Company has been buying up natural gas infrastructure in the South. What worries me in this report is that an LNG export terminal has been approved for Georgia. Why does this worry me?
Australia has enjoyed natural gas prices under AU$4/mmbtu, but players have also built up LNG export capacity. They have also written long-term LNG export contracts on the Australian supply. As a consequence, domestic NG prices are surging above AU$20/mmbtu. Moreover, this is doubling the price of wholesale power, and utilities are passing this on as 25% to 30% increases in residential power bills. Meanwhile, the global LNG market trades at glut prices of around $5/mmbtu. Basically, power generators and utilities could import LNG at lower prices than domestic natural gas, if they had LNG import capacity. So how does anyone make money off of this backward situation. The gas producers and distributors are able to jack up domestic prices by overcommitting supplies to LNG market. They take a loss in the LNG market, but make out like bandits in the domestic market. Domestic gas and power consumers are made to pay through the nose.
Could this be the sort of play that Southern Company has in sight for the US South? They cant make money in the global LNG market, but they could remove just enough domestic supply to jack up rates on domestic consumers. If this really is there game, then SolarCity may be moving into Georgia sooner than we think.�
1/1/2015
guest Southeastern Electric Utilities Find Their Way to Higher Profits Through Gas Pipelines and Captive Consumers
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1/1/2015
guest Thanks! This is really helpful.�
1/1/2015
guest Senators strike deal to move forward on sweeping energy bill
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1/1/2015
guest SolarCity Launches Residential Service, Expands Hiring in Utah (NASDAQ:SCTY)
SolarCity is expanding into Utah. Last week they announced also that they were expanding into Rhode Island.
Notice in this Utah announcement that there is no indication that they will be offering PPAs or leases, only loans and cash. Does this mean they are actually not offering PPAs in the state? Is there some regulatory reason here that applies specifically to Utah?�
1/1/2015
guest 5 facts about solar power in Utah | KSL.com
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1/1/2015
guest That's very interesting.
Looks to me like leases and PPAs are legal in Utah.
States that allow for Solar Leases and PPAs - Solar Power Rocks
I don't know whether SolarCity is going to offer leases and PPAs in Utah. But they aren't advertising them.
I think this marketing decision is further evidence SolarCity is deliberately moving away from leases and PPAs and trying to move towards loans and cash. Now that banks will finance solar panels with home equity loans at low rates, this makes tremendous sense.�
1/1/2015
guest Certainly consistent with a belief in their funding woes.�
1/1/2015
guest Thanks, Doggus and Neroden. It does at least appear to be a marketing tact. The ownership model may be more appealing to conservative consumers in Utah. Also, SolarCity really needs to move to a cash upfront model. If consumers don't demand PPAs, it's better for SolarCity not to push them.�
1/1/2015
guest So I did a tad more research. SolarCity advertised the introduction of a straight-up loan product in 14 states as of June 2. Adding Utah, this includes all the states they're active in west of the Mississippi, and most of the states in the Northeast, but *not* Pennsylvania, Florida, or Vermont for some reason. If I remember correctly from SCTY's financials, the loan program is prefinanced by banks, so SCTY does not take on any of the financing risk.
They're still advertising leases in other press releases. This press release mentions sales, loans, leases, but *not* PPAs: SolarCity Expands to Houston Area, Launches Popular Solar Service for the First Time (NASDAQ:SCTY) (Leases are much easier than residential PPAs to figure out the accounting for, so as an investor I think they're preferable to PPAs, although they still carry financing risk.)�
1/1/2015
guest Interesting. So the state by state differences could simply be due to the availability of financing partners in those states.�
1/1/2015
guest I would bet there's some regulatory issues in certain states. Pennsylvania has had every single solar roadblock imaginable since our last governor was a Chesapeake Energy plant, but we just last week installed our new forward-thinking PUC head.
Look for Pennsylvania to ramp up like crazy over the next year as pent up demand is released. NJ is a mature market right across the bridge and that market will flood into Philadelphia(the nations 4th largest metro area) like crazy once a few regulatory hurdles are unwound.
We're at a place in time where loan, lease, PPA can all be advertised in detail openly without worrying that one will make the others look less advantageous. If sales cost can be constrained across all offerings, total costs are low enough to simply let the market choose which solution they prefer. Exciting stuff.�
1/1/2015
guest Yeah, the legality of PPAs is still going to be an issue in some states, and this can be a barrier for some consumers. I've always have maintained that it is best for the each consumer to decide what financing is best for their family. So I do hope that SolarCity continues to offer PPAs and leases everywhere they can along with low interest loans.�
1/1/2015
guest Senate votes for energy bill negotiations with House
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1/1/2015
guest Thanks @jhm, @neroden, and @TheTalkingMule for the very helpful information. It always seemed to me that using PPAs as the principal funding mechanism was an artifact of how Solar City grew up and I have been assuming that Tesla Solar would offer more flexibility. Since it sounds like Solar City is already shifting to a menu of funding options for customers it appears that transition may already be happening. Seems like a very positive development.�
1/1/2015
guest I don't have a clue what the market will care about or exactly what is in this bill specifically for SolarCity. I did browse around the CBO estimate relating to s.2012 Energy Bill and found some interesting language which might overrule some PUC decisions...
S. 2012, Energy Policy Modernization Act of 2015
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1/1/2015
guest More developments in NV
Switch sues PUC, NV Energy for $30 million in damages, permission to leave utility�
1/1/2015
guest Good Drones Go To Bat For Low Cost Rooftop Solar
Here's a fun item on using drones to cut the soft costs of rooftop solar installations. I'm wondering in the SolarCity Tesla mash-up if they will work on developing robots to assist in rooftop installations. How about a robotic lift that can take panels from truck to rooftop level in optimal position for workers to take it from there. This could improve saftey and minimize the time spent on ladders.�
1/1/2015
guest Arizona is obviously wiser and more thoughtful than those reckless PG&E rubes who agreed to testing SolarCity utility services...whilst mid bailout and careening towards certain bankruptcy no less.
How Arizona�s Biggest Utility Is Modeling the Customer of the Future in Its �Rate Design Laboratory�
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1/1/2015
guest Pretty sure that APS won't go bankrupt
So in summary, rooftop solar sucks unless it is your local power company doing it. Pretty good validation for SolarCity�
1/1/2015
guest I'd fire my joke writer if he weren't a regulated monopoly and guaranteed a captive audience connected to his decreasingly relevant "ironic amusements".�
1/1/2015
guest Solarcity is starting grid services in September... The "pilot" is actual wholesale market participants in the real world, just a limited number. I expect a massive solar+storage product ramp across California (and all other utility participants at that time) in 2018...�
1/1/2015
guest Bring Back Solar initiative to return net metering to retail rates also won ballot access in November. A recent poll showed 74% of Nevadans want retail net metering to return so it looks like a strong yes vote going into Election Day.
Only issue now is the buffet backed lawsuit to stop it. Those hearings are set for July 29th.
If buffet shot down here, this looks like a mulligan back to retail and solar companies could return by year's end.�
1/1/2015
guest Electric/gas bills to rise in Northern Nevada | NevadaAppeal.com
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1/1/2015
guest Have there been any securitization announcements since Q1 CC? I haven't paid that close attention given my personal life is in shambles, but it seems like all quiet on that front for awhile.�
1/1/2015
guest Then what are Hanford, Yucca Mtn, Savanna River, etc built to store for thousands of years? Have you just found the next line item to remove from the budget?�
1/1/2015
guest from a supply point of view, nuclear energy is extremely close to being renewable, so close that its worth lumping it in as the same as hydro, or even solar, since nuclear energy uses less resources than silicon solar PV tech....
But nuclear does not exist in technology vacuum, its medical and military applications are profound, and must be part of the stakeholders considerations.
So there is the paradox, Nuclear is more renewable than silicon solar PV (compare Canada Candu reactors to Chinese PV) but Nuclear also has military, medical and decommissioning implications.
since Nuclear is basically an inflexible renewable, it, of all power sources is unsuitable for a high intermittent renewable grid. There is no fuel saving, just cost additions. At least coal and gas can cycle off to save fuel costs.�
1/1/2015
guest Silicon isn't a fuel, it's a technology. The sun is forever, as far as we humans are concerned. As is nuclear waste.�
1/1/2015
guest You might want to consider Amory Lovins rebuttal to nuclear claims to relevance.
Closing Diablo Canyon Nuclear Plant Will Save Money And Carbon�
1/1/2015
guest Electric Utilities Prepare for a Grid Dominated by Renewable Energy
"Our monopoly days are coming to an end." -- NV Energy�
1/1/2015
guest Democratizing DERs: What role should utilities play in spreading clean energy to all?
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1/1/2015
guest ooooh, I like this. Thanks!�
1/1/2015
guest No I don't think so. It's a bit concerning.�
1/1/2015
guest Valvoline junk bonds oversubscribed by 12x @ 5.5% this week. That has to be a good sign.
I trust that Radford Small, Lyndon and Elon are scheming as we speak.�
1/1/2015
guest Sadly not in time for the hundreds of @$30 and @$40 options expiring worthless tomorrow. Pour one out for my homies. Peace.�
1/1/2015
guest Maybe there isn't as much in this deal for SolarCity after all. ITC applies to stationary storage if paired with solar already. I suppose it's about federal access and standardization rules for the grid and probably some DOE Clean Energy projects too. It's quite obvious what the GOP wants, for it's part at least.
GOP energy negotiator accuses Senate chair of 'bizarre' promise
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1/1/2015
guest Japan to test 'virtual power plant' for renewables- Nikkei Asian Review
Japan starting a virtual power plant much like Pg&E pilot. Can't put the paste back in the tube now... Rooftop centric grids are coming globally.
Does anyone know the "U.S. company" involved in Japan's virtual power plant as stated in the article?�
1/1/2015
guest APS cutting into solar backlog
Arizona regulators approve APS demand management, efficiency programs
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1/1/2015
guest This is why I'm almost always on the sell side of options trades (except when I'm hedging or building a synthetic): I like having time value in my favor.�
1/1/2015
guest BREAKING: Hawaii PUC rejects NextEra-Hawaiian Electric merger
PUC votes to deny HECO/NextEra merger
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1/1/2015
guest On the Big Island HELCO gets 50% of their power from renewable resources. In my neighborhood about a third of the houses have solar and net metering. Quite a few people have cut the cord out in the country and most I know are doing pretty well. For some solar is cheaper than grid power.�
1/1/2015
guest Governor Signs Bill To Give Duke Flexibility On Coal Ash Cleanups
Trico proposing higher base charge, solar payback cuts
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1/1/2015
guest More financing....
SolarCity Raises $345 Million for New Solar Projects�
1/1/2015
guest Good stuff. Nice to see that some if it occurred in Q2. Would be nice to know the terms.�
1/1/2015
guest That's behind a paywall; I found the original on PRNewswire:
SolarCity Raises $345 Million to Finance New Solar Projects
Could someone explain to me exactly what the "debt aggregation facility" is? In words of less than 20 syllables, please. I am very slow to understand this... I'm trying to figure out if this is increasing SCTY's ability to refinance old panels.
(After looking this up, I think it doesn't. This seems to be the revolving loans for new construction, done prior to securitization. SolarCity Closes $500 Million Aggregation Facility | SolarCity )
Also, I basically get what the SREC financing facility is -- it's banks buying the right to future SRECs, for later resale to utilities. But what do they mean by "hedged" SRECs? Can someone explain in detail what exactly is hedging them?�
1/1/2015
guest Unfortunately there isn't enough detail in the release to tell anyone really what the debt aggregation facility is. From the title and the underlying business model I would guess that it is basically short term financing for new installs that allows solarcity the time to put together a package of installs to sell as an asset backed security. It is debt & allows them to aggregate systems.
Should have nothing to do with old panels. Plus it isn't clear how much of the older systems need refinancing and on what timelines. Most of the later ABS are designed for full payback so there won't be a need to refinance.
Have no idea how or what the SRECs are hedged, so can't really help�
1/1/2015
guest I would venture a guess that the +$70M goes toward expansion and Buffalo.
And maybe "hedged SRECs" refers to monetizaton that retains some portion of the potential upside. For instance, PA SREC's were sabotaged down to like $26 in value by the former governor, but may be worth $200 if allowed to appreciate naturally. You wouldn't want to sell off 100% of that up side.�
1/1/2015
guest Peppermill in Reno latest casino aiming to leave NV Energy
I guess Buffett hasn't gotten the NV Energy monopoly ending memo or the future cost of electricity going to zero...
Texas' billion-dollar power struggle: Warren Buffett, NextEra, Hunts vie for Oncor
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1/1/2015
guest They may have needed to add some protection to sell the SRECs b/c of Nevada & PA. That would also be considered hedged�
1/1/2015
guest Reno casino latest Nevada company to request exit from NV Energy service
The NVExit continues.�
1/1/2015
guest PG&E to Plug Enphase Smart Inverters and SolarCity Storage Systems Into Its Grid Control Platform
Hawaii LNG import boost uncertain after merger of Hawaiian Electric, NextEra blocked - Natural Gas | Platts News Article & Story
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1/1/2015
guest Headed to Ireland for 15 days to unplug, fingers crossed for Q2 results.
Fully expect to be a quadrillionaire upon my return.�
1/1/2015
guest quadrillionaire a bit less Sterling today;
Better take it in $s...
have a good trip�
1/1/2015
guest Thanks. I'll be buying pounds in Derry on Saturday so that's at least 2 extra free beers for me!�
1/1/2015
guest �s may be a better bet still ...�
1/1/2015
guest Anyone have any speculation on the Q2 results?
My guess is that installations will come in under guidance. SCTY has always installed quite a bit less than they booked the previous quarter, so I think they'll install ~150 MW (guidance is 185 MW) and drop full year guidance to 1 GW (from 1 - 1.1).
I do think their new loan product is being well received, so I think bookings will rebound pretty well to ~240 MW with sales cost per watt dropping half way back to normal (e.g .$0.75).
Overall, I think the near term results will be a bit ugly but the share price might not tank because of positive momentum in cost per watt, bookings and claims of FCF positive in Q4.�
1/1/2015
guest Thanks for the link! I really liked this part:
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1/1/2015
guest Well I'm pretty happy with the share price at $27. I think the deal will probably close around $30 but I've reduced my position substantially here to avoid the uncertainty of the Q2 ER.
My plan since the merger was announced was to sell 1/3 then, 1/3 when it reaches near the sale price (now) and then hold the last 1/3 through the deal. It's all nicely in the green for me with by far my biggest SCTY occurring at $16.88 after the last ER.�
1/1/2015
guest Google uses AI to cut data centre energy use by 15%
APS' plans to increase reliance on natural gas draw questions
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1/1/2015
guest Judge�s order prevents ex-Nevada PUC official from deleting social media accounts
Buffett's Berkshire Hathaway protests FERC market-based rate restrictions
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1/1/2015
guest In Texas, MP2 Energy Sees the �Shape� of Rooftop Solar as Value to Substitute for Net Metering
New gas pipelines would make U.S. miss climate target: report
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1/1/2015
guest Los Angeles Times Summit: Powering Forward | Lyndon Rive, SolarCity�
1/1/2015
guest Basic question:
Tesla's offer to Solarcity is "0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock" (from the offer letter). Suppose the deal ends up at 0.127 shares of TSLA for each share of SCTY, and also suppose that I own 100 shares of SCTY. 100 Shares SCTY * 0.127 Shares TSLA per Share SCTY = 12.7 shares TSLA.
I get 12 shares of TSLA, but what happens to the 0.7 shares of TSLA, since that's not a whole share?�
1/1/2015
guest Interactive Brokers told me any fraction will convert to cash.�
1/1/2015
guest Yeah, the usual way it works is that they compute for your entire holding, and then if there's a leftover fraction, they automatically sell it -- usually at the closing price on the day of the merger. (That's how it's accounted for for taxes, too. You have to treat it as a capital gain or loss on a fractional number of shares.)
So if I hold 1000 shares SCTY (or exercise 10 options!) I probably get an even number of TSLA shares, unless the exchange ratio is 4 digits.�
1/1/2015
guest I used the last of my available funds (for now) to pick up some SCTY at 6 cents above current low for the day. Max pain is at $28, low volume (which tends to favor movement towards MP, all things being equal), GF1 unveil party tonight, plus recent widening of the JHM TSLA/SCTY premium but with TSLA rising steadily, so I I feel pretty good.
Of no importance to anyone but me, between last year's (lucky fluke) gains and this year's losses I'm just breaking even. With more shares than ever to ride back up and some firm job prospects so I can accumulate even more, I'm feeling pretty optimistic about 2H2016. I only wish the merger would happen when SCTY wasn't so severely undervalued.�
1/1/2015
guest I am realizing that to make the conversions tidy, I should have round multiples-of-ten numbers of options, which I don't. Oops.�
1/1/2015
guest SolarCity Preannounces Q2 2016 Operating Metrics and Updates 2016 Guidance (NASDAQ:SCTY)
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1/1/2015
guest I think the interesting part is the two product releases, especially #2, which indeed looks like solar shingles might not be a bad idea�
1/1/2015
guest So $25.37 appears to be the end of the line. The third post in this thread had it about right:
sleepyhead,
Mar 24, 2014
For all of those who invest in SCTY, I am still waiting for answer to some very important questions:
How do you value the company? How much is it worth today, how much will it be worth 5 or 10 years from now?
How do you know when it is overvalued or undervalued? When it was pulling back to $30 a few short months ago nobody seemed to be buying. Now that it pulled back to $60, everybody wants in. Not a lot has changed in SCTY since then.
There is a lot of people who invest in SCTY on this board and I can see why, but I would bet that there is less than a handful (most likely 0 or 1) people here that actually can model out their forward looking financials to show how much the company is worth or could be worth. I know that I am not one of those people.
What are SCTY's risks, and how confident are you that they will be able to navigate around all of those risks to avoid seeing the stock crash 90%?
Is $60 a good price to get in? Was $88 a bargain? How come $30 wasn't a great a bargain?
Why do people lease a system from a middle man who gets the vast majority of the benefit from the solar system when instead they can buy the system outright and bypass the middleman? Yes, I know there are reasons such as difficulty obtaining financing to buy a system, but I guarantee you that this is going to change very rapidly over the next few years.
These are all serious questions that I hope all of the SCTY investors here are at least thinking about.
I sincerely wish you all the best of luck, but I prefer to invest in companies that I can build financial models for.�
1/1/2015
guest Thanks for sharing the link. I got excited with this one bit
"MW Booked increased 40% over the first quarter of 2016 to help drive a significant improvement in Sales Cost per watt."
Then I remembered, bookings are all lies anyway. That's what SCTY has always done. They lie.�
1/1/2015
guest There's a strong hint that they are making mhw numbers by large commercial sales.
I do think the new products will be interesting. It will be fun to see some upscale solar products from a major vendor. This sort of new stuff from small companies always suffers a quick death.�
1/1/2015
guest Perhaps he was right, but that only goes to show the unpredictability of the investment game. He was extremely incorrect on another stock pick for which there were extensive models, and in that case then end of the line was $0.�
1/1/2015
guest Remember guys Retained Value was computed off of bookings for a while. Then over time it turned out the gap between bookings and installs was getting progressively wider and they couldn't hide it anymore. Towards the end the cumulative gap turned out to be 2X (installs were half of bookings, cumulative). Then they eventually turned around and just said oops. RV tumbled to about half and they renamed it to something illegible... Bookings is all bull-sh!t which Lyndon Rive personally makes.�
1/1/2015
guest As an ex-shareholder who suffered serious losses because of lies and deception, I consider this justice (but only to some degree)
Elon Musk�s SolarCity Offer Wipes Out His Cousins� Stock Options�
1/1/2015
guest They will become directors of business units within TSLA. They will get new options. They will get paid off (but nothing like the payoffs of Musk). Gave it their best shot. Business chiefs usually pay off their henchmen at least to keep them comfortable. But I doubt the Rive pair last at the firm through 2017.�
1/1/2015
guest Well, it's not a triangle: Tesla/SolarCity: First look at new Silevo solar panel that Musk has been boasting about for its aesthetics features�
1/1/2015
guest Anybody worried that another buyer will acquire SolarCity? I don't think it is likely, but I would really not like to see SolarCity go into other hands. Musk would sell off his position and likely not have any more to do with it. It would take a really high priced deal for me to warm up to it.
At this point, I think of SolarCity as a way to invest in Tesla. So the value of the stock lies in the growth trajectory of the Tesla-SolarCity combination. Another buyer could offer more money, but it would be hard to match the growth trajectory of a combined Tesla.�
1/1/2015
guest No.
There's nothing I could do to stop an alternate acquisition, so I don't worry about it. In any case, I think it is extremely unlikely, as SolarCity has all of the appeal of toxic sludge to the broader business/financial community.�
1/1/2015
guest Interesting that it is referred to as "solar roofing" rather than solar panels. As it stands, it looks like a normal panel. Nothing special.�
1/1/2015
guest Trina Agrees to Management-Led Buyout Offer�
1/1/2015
guest
Well, not too much justice. From the link
"Lyndon and Peter Rive are among 15 top-paid U.S. executives".�
1/1/2015
guest That was including the options which he lost now.
Over last several years Rive's made a measly 300K/annum. That's less than a lowly manager's comp with a small team of 5 to 6 people in Silicon Valley.
The shares they sold in 2014 and the remaining that they continue to carry are from way before, even before ipo.�
1/1/2015
guest What is this, a dumping ground for the two of you now? This company is about to be part of Tesla, so quit your whining. Good day.�
1/1/2015
guest Nope, not really. It's a pumping ground.
We just try to provide a bit of balance. But clearly, it's not working�
1/1/2015
guest They're probably jumping to conclusions. Chances their compensation is renegotiated to have an equivalent in TSLA.�
1/1/2015
guest Updated: Headed for the exits, Nevada PUC Commissioner David Noble lifts lid on net metering fight
This is interesting Nevada PUC commissioner Noble claims that the solar industry never provided any evidence on the benefit of rooftop solar, and yet this was in fact submitted in TASC's testimony. It sounds like Noble did not bother to read solar testimony. So if Noble is wrong on a basic point of fact like whether evidence had be submitted or not, how will the court reviewing this case view the actions of the PUC. It seems some really basic points of process had broken down.�
1/1/2015
guest When does the court hearing plan to finish?�
1/1/2015
guest Commissioner appears to have a misleading name. No further comments, Y H.�
1/1/2015
guest The $47 million in stock he sold in the last three years was almost certainly earned as part of his compensation. Almost all the insiders were dumping stock, likely because 1) They saw real competition entering the market, and 2) The ITC set to expire.�
1/1/2015
guest You can see in the filing here. Rive brothers did not get any stock or options in 13, 14, 15 (the ones they got in 15 are getting cancelled).
I read on Bloomberg somewhere that Rive brothers didn't get an equity or option awards since IPO.
So it can be deduced that the shares they sold in 14 are from their stakes before IPO.
Why all insiders were selling like crazy, I guess we all understand that now. They were exiting out off a sinking ship as fast they can.�
1/1/2015
guest Not sure if they really need justice anyway, considering SCTY was nothing not that long ago and they've followed their mission statement.�
1/1/2015
guest Apple now approved to sell power:
Apple Can Now Sell Power as Tech Giants Boost Energy Investments�
1/1/2015
guest Supreme Court rules against referendum on rooftop solar rates
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1/1/2015
guest Thanks for the post. So it seems the Nevada Supreme Court has put this to Sandoval to decide. Since he axed Noble (previous PUC chairman) we shall see who he appoints as it will decide how this will go.
From my perspective, this is what he probably has to consider.
NV Energy (Buffet money), status quo with additional (1 billion?) investment by Berkshire Hathaway. Maybe 100-500 jobs for a new plant.
Tesla/Solarcity (Musk money), with new GigaFactory, 10k direct manufacturing jobs projected for now, more likely later. Hmm... Good manufacturing jobs, something this state seriously needs to diversify from Gambling.
We shall see. Guess the (technically unofficial) state motto "Battle Born" rings true here. I will just amend it to:
"Billionaire Battle Born"�
1/1/2015
guest Elon is the biggest solarcity insider and he didn't sell any, right?�
1/1/2015
guest Hampshire College seeks to get all needed energy from solar
HECO Launches Solar Self-Supply Option For Homeowners :: Solar Industry
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1/1/2015
guest It's working.....for those who are paying attention. And I wouldn't use the term "we", as pretty much every SCTY bear here other than yourself lacked any substance whatsoever in their posting. Hating on something is not the same as having fundamental concerns.
I haven't been following too closely over the last 60 days, but you certainly nailed SCTY at most turns over the last 9-10 months. Kudos to you for not starting an "I was right all along" thread! Personally I find your views a bit too gloomy for an Elon-run company operating in such a sure-thing growth sector, but the concerns were certainly real.
To me, there was never a scenario any worse than the one we're in right now where Elon folds SCTY into TSLA. People WILL be buying(leasing) all-in-one solar/battery/car solutions from TSLA by the boatload, it's just a shame that they couldn't get over the hump in time to make me rich. I somehow underestimated the level of regulatory corruption and over-rated consumer apathy. Shame on me.
I will wait for my residual TSLA shares to hit $320 and break even on my SCTY gamble. A year at most?�
1/1/2015
guest If Q3 is blowout and vote is in Q3/Q4 with shares recall prior to that you may see it still this year�
1/1/2015
guest Thanks for the kind words Mule
For the record, despite my views being largely bearish for a while now, I was never short the stock. After my long exit trade, I used to follow the thread and post merely as intellectual curiosity. With the recent merger talks I became lot more active just like many other TSLA players.�
1/1/2015
guest FWIW, I was earning income on 'loaning' my SCTY shares to the brokerage who then lent them to the shorts. This was really lucrative, as it paid interest at a 40% per year rate.
Apparently the shorts are closing their positions, as they returned the shares this week.�
1/1/2015
guest Carl Paladino's False claim about jobs at SolarCity
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1/1/2015
guest I guess they're not just mailing it in...but I am weary of these local battles up against the machine. Doesn't this just get ultimately added to their already bloated sales costs?
Arizona regulator hires attorney to investigate rate-case influences
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1/1/2015
guest http://www.azcentral.com/story/money/business/energy/2016/08/09/solarcity-backing-re-election-utility-regulator-robert-burns-dark-money-critic/88429706/
SolarCity And ComEd Discover Shared Vision For Utilities' Future
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1/1/2015
guest For us wretched souls, who basically ignored SolarCity because it made their heads spin but are now forced to face the music. Any of the regulars able to give us some insight what to look for in the upcoming earnings report? What to ignore?�
1/1/2015
guest Based on past performance, I believe @SBenson has been the most accurate of oracles.�
1/1/2015
guest I fall into the ignore category too, because Tesla is enough to wrap my head around and SolarCity is arguably even more complicated. However my hunch without diving too deep into the numbers is that there was an overreaction after the Nevada thing and after the last earnings where they revised guidance down. I'm guessing/hoping that they revised guidance low enough that they are now in an under promise/overdeliver position, which lends itself well to the already low expectations and high short-interest. I think there has been a misconception that SCTY is a sinking ship with terrible management, when in reality it's more like they are just passing through heavy waters with pretty above par leadership. I'm not sure the suggestion that Musk is taking over SolarCity because the Rive's have done a bad job is accurate, I think it's more like something he's been planning for a long time and the stars are aligned pretty well for it right now, and I wouldn't be surprised if Rive would welcome some help at the helm. Curious to see how much they talk about the merger and the prospect of the "go shop" provision. That's my 24 cents.�
1/1/2015
guest What I'm looking for are reductions in cost $/W, especially sales cost, nearly full asset financing per Watt and progress toward becoming cash positive. We already know that installed MW are up, though guidance for the year has be dialed back a bit. The growth was wicked fast in past years, but the company has needed to focus more on cash flow and profitability, and less on growth.
It made good progress in righting the ship over Q1, and I'm hoping they are even further along now.�
1/1/2015
guest I told you people Cash will drop like crazy - in the Bailout thread, first post.
Here it is end of Q2 - $146 mil (drop from $362 mil)
The only thing that is holding SolarCity together is the merger offer. Or else, the firm would go bankrupt in 2 weeks max!�
1/1/2015
guest I strongly advise people to forget about the arbitrage and jump to TSLA shares right away. God forbid if the deal falls apart, you will be left with a ZERO.
All f'ing serious.�
1/1/2015
guest I would appreciate your evaluation of these metrics now that the shareholder letter is out. There seems for example some reduction on the cost $/W but cash flow seems dramatic as @SBenson already indicated?�
1/1/2015
guest Maybe we have misinterpreted "cash flow neutral". Perhaps they were referencing having no cash.
But seriously, I expect "project financing delays" is just rewriting the terms to take into account the acquisition by Tesla.�
1/1/2015
guest Then how can SCTY merger do anything good for TSLA? Just because TSLA is a larger boat?�
1/1/2015
guest Merger has nothing to do with financing.�
1/1/2015
guest SCTY is the largest installer and probably the largest solar panel maker, Tesla is the largest electric car maker and battery maker. The big idea is to get all four of those together, the finances are just dust settling.�
1/1/2015
guest I almost wonder if they are deliberately making the finances look iffy so that they don't have to deal with any other takeover bids.�
1/1/2015
guest I think it is at the very least fair to say they have not articulated a vigorous defense of their business model or championed their plans transitioning to a vertically integrated future.�
1/1/2015
guest For example, just like Tesla they could have at least unveiled the new products, promoted the factory and defended the short term position while expanding the vision to get back on track to the ludicrous growth future as the prices keep falling. *shrug*�
1/1/2015
guest There's a lot of meat in this conf call. Didn't expect Musk to be on it, they're talking like the merger is done. Just said they are probably going to bring in a strategic partner for solar manufacturing like Panasonic with batteries.�
1/1/2015
guest I'm surprised Musk is talking so much about 20 year roofs, when so many upscale roofs in the southwest are semi-permanent.
It would be great to finally have a success with integrated solar roof.�
1/1/2015
guest If they make a good product that makes sense... it seems like at some point people are going to do this just to cut out their electric bill regardless of whether they need a new roof.�
1/1/2015
guest @SBenson There is a reason SunPower is down 30% after reporting, and SolarCity is flat-up a little.
SolarCity's costs will drop dramatically in the next 1-2 years, especially once SolarCity products are available at all Tesla showrooms and stores around the world, at very competitive prices.
The Tesla-SolarCity merger is not a bailout. If SolarCity needed cash, SolarCity could very easily obtain cash.�
1/1/2015
guest To me it looks like @SBenson isn't capable of analyzing facts impartially due to losses incurred. I lost my ass on SCTY LEAPs too (well, officially not yet but they're worthless now) so I can relate.�
1/1/2015
guest To say it's not a "bailout" is almost as silly as saying it is. Reality is somewhere in the middle. If SCTY didn't have big brother TSLA to fall back on it could certainly survive until solar is up to speed nationwide. But that not Elon's plan.
SCTY's mandate was to grow residential solar in the US as quickly as humanly possible. In doing so they borrowed literally every dime anyone would give them at a reasonable price. But the possible ITC expiration hiccup and various regulator messes were big speed bumps that shook up their financing model and made it harder to churn installs and financing.
Fact of the matter is, they will grow absurdly fast under the TSLA umbrella because it instantly cuts tons of cost. They'll grow at least twice as fast as they would have on their own. Since SCTY is the leader in residential solar, that means residential solar grows twice as fast. That fits Elon's plan, so that's what's happening.
F***ng LEAPS.�
1/1/2015
guest I don't think cost is the most important piece. Offering a product that fits into the future energy production needs: simple, price competitive with fossils, produced at enough volume, plays nice with regulatory environment. The bet we made was that this would be SCTY's leg up that would produce a breakout. How it will play out is that'd be under Tesla umbrella and probably producing tangible results in 2-3 year time frame. So not an unreasonable bet just not timed well. I can live with that, no problem.
Edit: with a hindsight this would not be such an outlandish thing to predict. There was enough data to envision this scenario as one of the likely outcomes a year ago.�
1/1/2015
guest Oh yea, "bailout" would be relevant in the face of imminent collapse, which there's slim evidence of. What we're really looking at is JHM's blind faith numbers getting better justification with an integrated energy product offering that is likely to be as big if not bigger than automotive one.�
1/1/2015
guest This is the upside (better integrated support of Tesla Energy, turning a current side business into a bigger business than automotive) I see with the Solar City acquisition. And why I'm more in favor than not.
I want to see Solar City move away from the financial engineering, or find a way to make it more understandable. This quarter's letter to shareholders was 17 pages long - I think 4 pages of actual letter and 13 pages of disclosures (*my bad - 5 and 12). That's not a balance I like to see in my investments (too much of both, to explain what the moving parts are and how it's going).�
1/1/2015
guest The reason SolarCity is not moving is because its tied to Tesla. Had it been there without merger talk, you'd see a free fall. The cash issue is well known and was the reason the stock performed so poorly for the past year. Most people looked at installations and forgot about cash generation and super high customer acquisition cost.
Well, Mr. Musk made a call to bailout the existing holders at the expense of TSLA holders. All I can think of now is the $150M synergy they talked about comes to realization. But, SCTY with less than $150M in pocket is going to be a drag in the next few quarters.
Those who made a right call by staying away in too much noise, take positives and gain confidence.�
1/1/2015
guest (a) Yeah, if the deal falls apart it's Big Trouble for SCTY for sure, but personally that seems exceedingly unlikely to me after analyzing who the voters on the deal are. Looks to me like the would-be "no" voters all sold their stock as soon as the deal was announced, while the would-be "yes" voters loaded up on stock. Gotta be wililng to stomach the low-percentage risk, though. I don't see any reason why the SEC would turn the deal down but I suppose it's possible.
(b) Suppose the deal does fall through. SpaceX seems remarkably willing to finance SCTY in the short term, having refinanced $75 million in 'solar bonds' in June. If SCTY can get their house in order and get the cost per watt below the outside finance per watt, which it seems like they're doing, I suspect they'll manage to stagger along without going bankrupt. Certainly the stock would drop by a *lot* though (50%? 75%?) I doctored my effective purchase price way down with options tricks, so I figure if the deal falls through I can probably get out of this with only 25%-30% losses. I wouldn't buy the stock at this price, since the arbitrage is only about 3%, but the arbitrage available in the options was in excess of 30% (it's been shrinking).
SolarCity is only at 19% own-or-loan deals. They've explicitly said they're trying to raise that number to get out of the PPA/lease financing mess. This means an exit from the financial engineering. They can probably get enough cash to get them through the process of that transition. Of course if the Silevo panels are duds it would be a disaster, but the rumors indicate that they're actually pretty decent.�
1/1/2015
guest
This year has everything to do with what happened in Nevada. Period. Buffet utility doing dirty tricks to save his investment. Both Solarcity and buffet entered Nevada in 2013 and you can see the extreme swing against solar from 2014 on. Check the record.
Solarcity is a very strong company with a massive future globally. It's not even a question.
Solar lease/ppa will remain strong into 2020, due to ITC. it baffles me that analyst actually think the "ownership" market is bigger when only a minority of homeowners can actually use the ITC. If people think consumers will chose a large monthly payment on a loan, they are in fantasy land. If given a choice, a consumer won't go solar when monthly bill is high, even if the long term cost is cheaper. The lower then utility monthly payment is the key driver for going solar, loans aren't going to make mass market impact until that happens.
Solarcity solar roofs will be in partnership with home builders in addition to organic installs. They already have dozens of relationships with home builders already so I see a natural extension come next year. It is an amazing synergy with the new home construction market and will be a major value add globally.
Can't forget that Solarcity is already invested in solar+ battery in Africa through off grid electric which has set its sights on 1 million instslls within the next few years itself.
Lastly, I continue to assess this deal as significantly undervalued. The impact of buffets dirty tricks can not be overstated of which only tesla, ironically, has benefited because it has stolen this company from Scty shareholders and Solarcity employees/management with significant options packages.
For those with long term outlooks, a significantly higher value long term bond might alleviate some no votes on the deal.
And for the whinny/rude Ben Kalo on the conference call, don't take out your bad bet on sunpower on Solarcity management... The only management change that needs to happen here is your clients away from you with all your terrible recommendations....
Add:
Tomorrow, UNS solar policy decided in Arizona, so might see further support continue post earnings call...�
1/1/2015
guest This dude has been wrong for years in a row, with his evangelical preachings, sucking as many suckers as possibly can.
Despite how terrible the track record is, yet comes back again with hysterical nonsense.
It's amazing how he writes with no references, no numbers, no nothing with just wild claims. Bizarre stuff.�
1/1/2015
guest God I hate listening to conference calls. Wish transcripts showed up faster.�
1/1/2015
guest Ok, @SBenson, you did call for loads of cash burn, but it did have some objective reasons why it hit Q2:
So in fact their cash position has improved now during Q3 as some of the financing was delayed due to Tesla offer. But yes, at Q2 cash burn rate SCTY would last only 1 more quarter. However their shareholder letter actually expects positive cash flow from Q3, Q4.
�
1/1/2015
guest Even if everything in July came through in June, they'd still have faced a massive cash reduction, right? Anyone who knows what their convenants are with their lending partners? There must be at least something in there about maintaining a minimal cash position? That's the point that is for now really important because it is the point where TSLA is going to pony up for a bridge loan and the future acquisition becomes a cash drag.�
1/1/2015
guest Next solar project maybe?
Chernobyl�s Atomic Wasteland May Be Reborn With Solar Energy�
1/1/2015
guest Great up-to-date charts here for SCTY:
SolarCity's Results Are the Ultimate Pitch Book
All looks good, especially cash and debt over last few quarters. Just a few short-term bumps, not meaningful.
Believe in the vision.
Tesla gets a superb company that will bring amazing synergies to Tesla (and cash-flow) very, very soon.
Go Elon!
I do hope all shareholders approve this merger to form a global cleantech giant asap.�
1/1/2015
guest Exactly right. These cash / debt charts are just minor short-term bumps:
Cash Is (Sin)king
Tesla gets SCTY at a huge discount (remember SCTY had price targets above $100 a few months ago).
However, TSLA needs to be watchful that there are no other competing bids for SCTY. There could be many competing offers for SCTY, the so-called shopping window...
Tesla (TSLA) and SolarCity (SCTY) reportedly about to announce merger agreement with �go-shop provision�
Big Oil could steal SCTY at the last minute with a higher offer.
Great suspense, but Elon will win this one as well. Go Elon!�
1/1/2015
guest Troll fights... Yay!!
Bull troll vs bear troll
yay!!!�
1/1/2015
guest Thanks for your interest.
The cost of $3.05/W is a solid improvement over last quarter, but still too high. Specifically, sales was at $0.71/W, and this should be under $0.55/W. Other cost components are creeping up a bit too. So I'd like to see cost drop below $2.80/W, and management is targeting one of their lowest ever $/W by Q4.
Asset financing was at $2.54/W. This is a disappointment. Management claims that it faced project financing delays owing to disruption from acquisition offer. So they should be financing at least 100% of the cost per Watt to have positive cash flow (allowing for project financing, of course).
The asset financing gap was $0.51/W (= $3.05 - $2.54). On 201 MW installed this exerts a $102.5M strain on cash flow. EOQ cash is $146M is a bit surprising, but due to delays in financing. As of EOD Monday, cash was at $214.6. So apparently they have been able to recover their cash position. I will wait for the auditors to opine on going concern before jumping to conclusions. SolarCity has enormous capacity to cut spending on sales and installations if it were to find itself in a genuine liquidity crisis. Remember that it burns through cash at a rate of $0.5/W just to keep growing the book, but it is under no obligation to keep growing at such a rate. So low cash levels puts growth at risk.
So the key issue for SolarCity is closing the financing gap within two more quarters. This will be done by decreasing the cost per Watt while increasing asset financing per Watt. Recurring cash generation from the PowerCo was $86M. So if the financing gap were under $0.1/W, the PowerCo support 900 to 1000 MW per year. Thus, it is not absolutely essential to eliminate the financing gap, but they do need to shrink the gap quite a bit.
Grid services may open up yet another revenue stream, but utilities move at a glacial pace. It's nice to see some progress, but I don't expect grid services to become a major revenue stream anytime soon.�
1/1/2015
guest I think this is a bit over the top. Yes cash did drop but you don't mention its back up over $200 mil now.
When the Tesla deal was announced a lot of potential buyers of SCTY's cash flows were hesitant to buy because they weren't sure if the deal was going through and they thought SCTY might be in worse shape than they realized. Now that the deal looks certain, the opposite is true: SCTY has TSLA as their backing sugar daddy, so firms will be more willing than ever to buy cash flows from SCTY.
This month and next SCTY are likely selling a lot of cashflows, as they did last month, so even if the TSLA deal surprisingly falls apart I think SCTY will be through the worst of the crunch. Each quarter their new installs comprises a smaller and smaller portion of their total book, and in general the margin value on these installs is improving, so their financing needs are steadily dropping. It sounds like SCTY will be cashflow positive in Q3 and is really lined up to nail Q4 with a really low cost/watt, lots of financing and a nice margin. If things go according to plan through Q4 - even if the TSLA deals falls apart late Q4 - I think SCTY could stand nicely on their own in 2017.
[Usual caveat: I don't fully understand SCTY's books and could be easily be wrong]�
1/1/2015
guest Seriously, who does?
Look at the price targets attached to this company from the likes of Stifel, Morgan Stanley, Raymond James and Deutsche just 6-9 months ago.
Range from about $60 to $105. Buy, Buy, Buy, Overweight, Market Outperfom etc.
What's Tesla paying again for SCTY?
Where are all the competing offers if this is the bargain of the century?
This is a financial black box bleeding cash - trading as a solar company.
And mind you, most stock indices are at all-time highs, interest rates are in historical ZIRP/NIRP territory.
What happens to companies like SCTY in the next severe downturn or a future recession?
But back to the bull echo chamber without any disturbing bear noise. It was fun.�
1/1/2015
guest In fairness to the bulls this is the industry leader in what will clearly be a half trillion dollar market quite quickly. Oh, and it's also chaired by today's Henry Ford to boot.
It amazes me that we are incapable of merging the bull and bear perspectives into one semi-rational picture of reality, but I guess that's indicative of the state of all things in America today.�
1/1/2015
guest SolarCity�s 1GW Buffalo fab to produce complete BIPV residential roofing system
Some nice details here. I like the product strategy, addressing new roof market (5 million annually) in a way that does not cannibalize the panel market. Distinctive products can help lower sales and marketing costs.�
1/1/2015
guest 1) You're wrong.
2) My view is SolarCity. When you look at who owns both companies, SolarCity was always an unofficial part of Tesla. The bargain price of $25 is probably intended to give Tesla a bargain, that in turn will benefit SolarCity because it will make it much easier for Tesla to maximize the value created by SolarCity. It will be almost impossible for SolarCity to realize it's optimal value as a stand alone company. However, when SolarCity becomes part of Tesla, it's not hard to see how SolarCity could be worth $10-$15 billion today.�
1/1/2015
guest This makes zero sense. Are you just making sugar up to defend your position? SCTY value is what it is. Tesla values it 10% more than market because it can be integrated into Tesla's energy branch and it fits well within Tesla's roadmap. It's as simple as that.�
1/1/2015
guest Anybody have the lowdown on the merger timeline? My understanding is the 45 go shop period started Aug 1, then when it's done they pick a date for the vote which will be as soon after assuming they get SEC FTC? approval. Is that right, partially right?
Also, regarding SCTY's status. Musk has a strong tendency for buying things when on sale, even for a very wealthy person, in fact most of his business ideas seem to center around finding a cheap/more economical way of doing something, that's the whole plan for Tesla remember, and that's how they got the Fremont factory. The finances appear to be rat's nest right now, but I'm guessing that in a year or two, maybe sooner, it will look like Tesla "got" a great deal on SCTY.�
1/1/2015
guest @tander that sounds correct to me with SEC deal being a question mark on how long will that take.�
1/1/2015
guest Thanks for explaining. If I may, I'd like to add some more questions. Sorry if they are very basic, as I said, I ignored SCTY till now
The letter seems to suggest that the best way to reduce costs per W (esp sales) is simply to sell more. Yet they guided down on sales volume? Is my basic understanding on these assumptions right? And if so, how does that square with lowest costs per W ever by Q4?
Asset financing is the amount of financing they get measured by how much they have to pay for the costs of goods installed?
But what then with their own gigafactory on NY? If they don't sell anymore and liquidate all their sales channels, can they liquidate their production just as easily?
What is PowerCo? When you say recurring cash generation, that's the cash SolarCity gets from the electricity sold on the panels they installed? They don't need to share this cash with the homeowner who had them install? Or is the number a net number and that part is already subtracted?
What grid services exactly are we talking about? Installing large solar arrays as a utility subcontractor? What's the supposed margin on such activity? What's SCTY's unique advantage in such a market?�
1/1/2015
guest Finally, I understand SCTY is a highly leveraged company. How is it protected from future rate rises? For example should the Fed rises rates in September, is SCTY going to feel the effects of that on its outstanding debts pretty soon or is most of it locking in for the long term?�
1/1/2015
guest About the PowerCo, what I understand is that when SCTY sells PPA-s to customers they basically build the solar installation and sell the power it generates to the customer at a fixed price per kWh. That recurring revenue is what shows up as PowerCo and should grow as a means of install base expansion.
Asset financing is basically securing funding either through tax equity or other means to cover the cost of installations. Tax equity as I understand is a method where company that's due to pay taxes can instead invest said taxes in tax equity qualifying projects i.e. SCTY panel installations. They then get a certain amount of recurring revenue back from it I think. Am not 100% sure on what they get back to be fair, but I have understood that from the assumed 20+ year lifecycle the asset backed part is flipped in ownership on some year (10? 15?) to SCTY ownership. So up to that time the asset is generating revenue to the company who provided the tax equity and then a flip occurs and the revenue goes to SCTY from there onwards. So if a customer renews that's already pure profit because the assets are paid for and running (ok, there is inverter swap priced in at every 10y I think).
That's what I have gathered on the financing of SCTY in the last 1.5 months since the deal was announced and I've tried to figure out what SCTY does�
1/1/2015
guest Cost per Watt is a mixture of overhead and variable expenses. Certainly G&A are fixed, but sales and installations are mostly variable, especially if you allow for workforce reductions. (Note that SunPower is laying off 1500 workers this years, but I've not heard any suggestion that SolarCity is contemplating such a reduction). Simply holding production at 200 MW/quarter should reduce cost pressures associated with trying to grow production, more efficient marketing at low volume, less workforce recruitment and training, fewer new field offices. lower G&A complexity, etc. So basically I think letting off the gas pedal will improve $/W.
Asset financing is on a basis of more than just COGS, but all the elements that go into cost/W, inclusive of SG&A. Additionally, the have the potential to finance more than just the cost/W. In theory, they could finance the full value per W, though partner investors would want SolarCity to retain some of this value anyway as good risk management. That is, for example, SolarCity retains the full value of the optional renewal terms, and this is enough to assure partners that SolarCity will do a good job servicing both customers and solar systems so as not to undermine the renewal value. Altogether SolarCity retains an NPV of $2.2B, and this stake in payment stream is important to all partners offering financing to other parts of that stream.
If SolarCity manufactures more than it can consume, it certainly has the option to sell panels wholesale. Especially as TE/SC produces integrated products, this does open up international markets for SolarCity's manufacturing capacity. I think we are looking at a ramp that reaches full capacity around 2019. I'm pretty confident that global market for solar panels is robust enough in that timeframe.
SolarCity conceptually divides its business into a DevCo, which sales and installs solar systems, and PowerCo, which finances and holds the value of those solar systems for life. (They should also speak of a FabCo too, in my opinion.) So the $2.2B NPV is the value of the book of business the PowerCo holds. As this net cash flows comes in, it is called recurring cash generation. This cash is not distributed to customers nor to any financing partners (that is already netted out). Rather this is net cash flowing to common shareholders. So in principle, SolarCity can reinvest it or use it to pay recourse debt. (As an aside, I'd love to see Tesla issue preferred stock having a dividend based on a portion of the recurring cash generation. Thus, Tesla common shares would be a pure growth play, while dividend investors would be attracted to preferred shares and so generate capital for growth.)
We're still waiting on details about grid services. Generally this is about aggregating distributed solar, battery and power management capacities to help utilities manage their power supply and costs better. For example, if a utility substation is stretched to its transformer capacity limits, it may need to spend tens of millions of dollars to upgrade the transformers. Even at below capacity, peak power demands on transformers stress those assets and cause them to age faster. So a combination of distributed energy resources (DERs) placed downstream of transformers can reduce peak demands and help the utility avoid costly replacement and upgrades. There are utilities that are willing to spend $20M or so to reduce peak substation loads by 1 MW in lieu of even more costly upgrades. It's not hard to see how batteries and solar can do this for a lot less than $20M, but you have to place these assets somewhere. So the advantage that SolarCity has in this space is that it is really good at placing and maintaining these DERs. Regulated utilities are generally barred from providing behind-the-meter solutions to their customers. But this is exactly what SolarCity does. Naturally, Tesla Energy wants to get in on this, but without SolarCity, TE does not have sales and installation capabilities to do this behind-the-meter work. It would have to build up this capability or simply act as a supplier to other installers. So the acquisition of SolarCity is one of the most attractive ways for Tesla to enter this market. Consider also that SolarCity's existing customer base is also a useful asset for TE. If a utility wanted a peak power solution for a substation where SolarCity customers already exist, then TE/SC could easily persuade customers to add Powerwalls and other power management devices to their solar systems. So TE/SC would be able to deploy rapid relief to a utility and build up from there over time. So the existing customer base has option value for grid solutions above and beyond the $2.2B NPV.
The downside to all this, however, is that it depends heavily on the willingness of utilities to seek out lower cost solutions, which TE/SC would be delighted to provide. If utilities want to resist these solutions, they need only convince PUCs and other regulatory bodies to allow them to put higher cost solutions on to ratepayers. So the politics around all of this is pretty sensitive. SolarCity will likely need to soften up on net metering to get utilities to play ball on grid services. But this is exactly what must happen to lower the cost of power for all ratepayers and solar owners. Simply put, SolarCity needs to transform utilities from being competitors to being customers. It's very tricky politically. And SolarCity may even need to back off on aggressive solar growth to avoid antagonizing the utilities. Tesla, with its position in EVs, holds some power here because utilities want to be able to grow revenue on EV power consumption. It is practically the only growth opportunity for utilities in developed countries. So TE/SC could find a stronger seat at the table combined than as separate entities.�
1/1/2015
guest Of course they're leveraged, the entire company is designed to grow at 80%+ year after year if not more. There's no way to do that without taking on tons of debt.
As for the second question....there doesn't seem to be a clear answer. Before the Nevada debacle, SCTY was on it's way to(or already) "financing more than 100%" of total install costs. So on the surface that allows for a somewhat sustainable business model. There are obviously copious other costs outside of install costs, the weight and effect of which is hard to ascertain.
The big thing most people don't seem to get is customer acquisition cost are the only real variable left in the equation. While hardware costs and direct install costs have steadily been minimized, sales cost is all over the place fluctuating from $.55/W to $.67/W back down to $.59/W then up to $.91/W. That has a HUGE impact on the overall sustainability and efficiency of the business model. Not to mention that each degree of sustainability then makes the entire investment more safe and therefore cheaper. In the other direction, uncertainty in the marketplace due to corrupt regulators causes huge customer acquisition cost with in turn causes financial uncertainty and MORE increased cost to finance.
What we've seen over the last year is a war of information between the utility interests and SolarCity. SolarCity clearly lost the battle while fighting valiantly on behalf of the entire industry, but I see absolutely no avenue for Elon Musk(SCTY under the TSLA umbrella) to lose the war. Under TSLA, customer acquisition cost instantly shrinks to $.45/W or so and then dwindles down toward the near zero point where Germany has been for more than 3 years.�
1/1/2015
guest If SolarCity falls any further, I'd be very surprised if Elon doesn't buy an additional $200-$300 million in stock.�
1/1/2015
guest I think that would be a clear no-no. He might want to but it would be ill-advised.�
1/1/2015
guest Why? He's a disinterested party when it comes to the merger. As long as he disclosed it, I can't see any problem with it.�
1/1/2015
guest No, he's recused himself from voting. That doesn't mean he's disinterested. It also doesn't mean that he isn't privy to significant non-public information, being as how he's on both boards.�
1/1/2015
guest Smart sharing: Sun-saturated Hawaii debates first TOU community solar proposal
It looks like SolarCity could have a new opportunity in Hawaii: TOU rates for community solar.
Note that the peak rates in Kaua'i are actually set by SolarCity dispatchable solar-battery facility on the island, 14.5c/kWh. Kaua'i has the lowest rates of all the islands, which is a bad mark of HECO which is the utility for the rest of Hawaii. In any case, SolarCity has the opportunity to compete for all these higher rates than their Kaua'i PPA.�
1/1/2015
guest Central commissions solar array and battery storage�
1/1/2015
guest SolarCity needed to be bailed out because of this
![[?IMG]](http://dqbasmyouzti2.cloudfront.net/content/images/articles/market-tracker.png)
The US Has 10GW of Utility-Scale PV Projects Under Construction
Utilities are choosing lower cost solutions, which at about $1 / watt fully installed is far far below SCTY cost.
Deutsche Bank: U.S. utility-scale solar costs to fall below $1 per watt
and therein lies the problem, SCTY 'acquisition cost' alone is almost as much the complete, fully installed cost of utility solar. Something had to change.
Can Tesla Energy make a profit, absolutely, but first Solarcity needed to be taken out the back and shot.�
1/1/2015
guest The U.S. ITC ensure a substantial residential market, which is independent of the utility market. While this may not be a rational use of taxpayer dollars, it is what it is.
Solarcity's problem is low barriers to entry, lack of sufficient differentiation from competitors, and a too expensive business model. Musk can improve some of these problems, but fundamentally there doesn't seem to be a big problem that Tesla can solve with solarcity.�
1/1/2015
guest The idea that monopoly utilities will be permitted to somehow beat residential customers to the punch on solar is silly. Utilities are granted these extraordinary monopoly rights in order to perform tasks that consumers cannot perform, like build a nuclear power plant.
Yes it may seem like the American consumer is asleep at the wheel, but that will not last long.
You're talking as if SCTY enjoyed paying huge amounts of money to sales people. That's what was required at the time to get these markets up to speed(aka Elon's mission). The market is much more mature now and Tesla's brand name is now up the stratosphere, not really fair to say that TSLA will have an easier time selling due to some sort of different management strategy. It's mostly timing and regulatory issues.�
1/1/2015
guest The truth is, Solarcity is pretty much the majority of all political, legal, and pr for the entire rooftop industry right now and are paying for it.
There has been a significant uptick in political contributions as well as policy focus as of this whole Nevada battle.
They brought in Jon wellinghoff, at a price.
They have also hosted fund raising events, most notably for Hillary Clinton presidential campaign. In general, they are spending more on policy makers and regulators then ever before.
They are contributing to Arizona commissioner burns election bid among other support for local political reps in key states.
They've also had to spend a lot on transferring employees out of Nevada as well as financing the "bring back solar" organization there including costs for legal actions at the same time.
They also have started, financed a new advocacy/trade organization called energy freedom coalition aimed at countering traditional utility attacks.
This has all come within the last year, since the Nevada battle and all of it has been an increased cost to the company.
This specific cost is something Tesla could share, which would significantly change a lot of the cost of installs for Solarcity. The reality is that their operations team is operating at a very high level and is best in class. Their all in cost cutting is purely a policy/regulatory issue that is signifcantly mitigated with a tesla/Solarcity combined policy team effort.
In addition, Elon is also a very good marketer/pr man on conference calls. The entire news cycle after the earnings call was on elon's "solar roof" comments which Lyndon refused to comment on just be fore Elon interjected.
That "teaser" trailer Elon did within a few seconds, made all the difference for the entire post call narrative. And this ability to control the message is what has been lacking from Lyndon. Now if only Lyndon can take note...�
1/1/2015
guest PV Magazine Mobil: China triples H1 solar installations to 20 GW
Wow, China has added 20GW of solar in H1 2016. End of 2015 cumulative was 43 GW. So this is a huge step up. Chinese panel makers have stepped up production 37%, and their profit margins are improving. So clearly global demand for panels is strong.�
1/1/2015
guest These links are really good news. There was a huge utility pipeline owing to the ITC cut off. But with the extension, the end of year pressure is off. So 10 GW utility solar is a really good installment and much needed.
Additionally the point of Chinese solar makers building out production capacity in other parts of Asia is very good for SolarCity and other installers. This enables them to get around punitive tariffs against Chinese solar makers. SolarCity sources panels from China, so this helps cut costs.
Am I worried that utility solar at $1/W might impact residential installers? No. There is no way utilities can cut residential retail rates even 1c/kWh with utility solar or even wind which is even cheaper. The scale is just not there to make a bit of difference.
Honestly we need all the solar and wind we can get. These days I'm much more worried about my utility Georgia Power trying to build up a fleet of new nuclear plants on the backs of ratepayers. Even if you ignore the huge capex and future decommissioning costs, opex on nuclear is around $50/MWh. Meanwhile North Carolina is getting all in solar PPAs under $40/MWh and wind is even cheaper. But the GA PSC has been persuaded that Georgia needs new nukes. So I'm already paying for this crap on my monthly power bill and have been for years, while my utility drags it feet on much cheap, much more rapidly deployable wind and solar. So do tell me this foolishness about how utility solar is going to lower my power bill. I really wish it could, but that is not how the game is played, not in my state.�
1/1/2015
guest I like this integrated energy park idea. Saves money on interconnection costs by sharing the connection. The mix of generation and storage should earn it a high capacity factor.�
1/1/2015
guest I was expecting to hear SCTY re-affirm their previous guidance for cash-flow positive in Q4 of this year, but couldn't find any mention of this in their earnings report or conference call? Nor did I hear any analysts ask about this?
Did I miss something? Or is SCTY not aiming to be cash-flow positive in Q4 anymore?�
1/1/2015
guest As a wild guess, I'd say maybe the outlook has changed when Tesla offered a buy-out? Can't say how, and I doubt many could actually.�
1/1/2015
guest Not sure if this has been posted yet, but watching the Germans is a good indication of what the US market should look like in short order.
Germany sets new solar storage record
"...41 per cent of Germany�s new solar installations in 2015 included battery storage, compared with less than 14 per cent the previous year."
"Since 2013, 43,000 applications for solar systems with battery storage have been approved -- 19,328 last year alone."?�
1/1/2015
guest And none of those installations use a Tesla powerwall. Here is the German equivalent of Consumer Report on batteries for Solar installations. It's in German but it lists 312 competing available solutions. Meanwhile, Tesla's car business as zero (0) competing solutions. Zero. That is in essence why I am not convinced of the value of Tesla Energy as opposed to Tesla Automotive. It is simply not a business where creativity makes a lot of difference, it's not a business that sells products that people take particular pride in (cars as status symbols), it is not a market where Tesla has a first mover advantage and it is not a market where it can protect yourself from Chinese manufacturers selling at loss through unique advantages on the ground like fast charging infrastructure. Between here and 5 year, the battery storage market will be commodity with razor thin margins. Tesla's product may be technically marginally better but Chinese products will simply drop the price to buy market share. That is my prediction and I stand by it, gigafactory or not.�
1/1/2015
guest Tesla Energy's prize is the potential to buy 100kWh in a rack for $25k, however lately if you go here:
Build your Powerpack Energy Storage Solution | Tesla
And for my Solar Powered Delicatessen I want to keep my meat cold during a Zombie Apocalypse.
The pricing of a 100kw - 200 kWh Powerpack sytem, with 2 powerpacks lists out at:
2 Powerpacks $89,000
So, the offering of $25,000 powerpacks appears to be not correct. Looks to be $44,500 now.
- 1 Bi-Directional 250 kW Inverter $52,500 (quite high pricing here - what brand?)
- Cabling & Site Support Hardware $3,600
- TOTAL IS $145,100
Volume pricing up to 10 powerpacks, still $44,500. Same for 20.
What does this nearly doubling of the "advertised price" back in April of 2015 do for demand? Are we hoping that state and federal incentives is the calling card to make people say "oh, we have ITC 30% and SGIP or NYSERDA to pay for it!"
All you need to know about Tesla's big battery announcement�
1/1/2015
guest And here's an example regarding SMA, inverter powerhouse, closing a USA based plant in Denver (280 jobs lost). How strong is this solar industry "really"? I think solar's strength lies in large installations - 1MW or more using large-scale inverters (ABB and others). What do firms do? Get out of "expensive USA" (labor costs, real estate costs, taxes).
SMA Consolidation Means Closure Of Two Manufacturing Plants :: Solar Industry
Anyway - SMA is one company now that I would say "avoid at all costs". (pun intended).�
1/1/2015
guest I think Teslas main advantage will be a software stack that seamlessly links and manages things. And the fact that it's a one-stop solution from one brand meaning that it should eliminate a lot of finger pointing between panel people, inverter people and battery people. An intelligent house that knows how to manage its power, how to do rate arbitrage if there is no solar or the forecast sucks etc and that can also manage and scale the cars usage based on how other elements of the house plan to use power. That's a neat system and if the integrated solution comes to a decent price point, then I think it would be attractive.�
1/1/2015
guest That's certainly somewhere they can make a difference. It's probably also the reason why they decided to make their inverters inhouse. Another interesting fact from @ecarfan : the software inside the SolarEdge inverters currently sold with Powerwalls was written by Tesla!�
1/1/2015
guest Schneider Electric offers a full DC Coupled solution for hybrid battery solutioning today (I just attended a 1-hour training class as an audit). They make J-1772 EV charging solutions. They just don't make batteries. They use telemetry and can tie together V2G eventually. Seems like a company nobody even talks about. And add another company to the mix who is almost the same - ABB. They have Solar inverters (bought PowerOne, which is good stuff) - then they also offer battery subsystems (partners with Panasonic). They also offer DCFC car charging solutions. Those two are name brands and doing much of this work now.�
1/1/2015
guest On August 16, 2016, SolarCity Corporation (the �Company�) adopted and began implementing initiatives to realign the Company�s operating expenses to match the Company�s reduced guidance for Megawatts Installed. The realignment is expected to be completed by the end of 2016. The Company expects to incur restructuring charges ranging from approximately $3 million to $5 million, consisting primarily of severance benefits. A substantial portion of such charges are expected to be incurred in the second half of fiscal 2016. The actual timing and costs of the realignment may differ from the Company�s current expectations and estimates.
To align with the Company�s cost-cutting measures described in Item 2.05 above, Lyndon Rive, our Co-Founder and Chief Executive Officer, and Peter Rive, our Co-Founder and Chief Technology Officer, requested that the Company reduce their annual salary from $275,000 to $1 per year for their services, and, effective as of August 16, 2016, the Compensation Committee of the Board of Directors of the Company reduced the annual salaries of Lyndon Rive and Peter Rive to the minimum amount permitted by law.
SolarCity - Current Report�
1/1/2015
guest In a separate filing, SolarCity said it planned to issue $124 million in bonds. The bonds carry a 6.5 percent interest rate, higher than any of SolarCity's previous offerings, and also have a longer maturity rate of 18 months.
SolarCity slashing costs, including CEO pay
No good and stable company pays 6.5% rate on bonds.�
1/1/2015
guest arbitrage opportunity
current bonds 12% yield
new bonds 6.5% yield
Bonds Detail
even a struggling company tries really hard to buy back bonds when their own bonds have 25% yield. SCTY did not!
why not?�
1/1/2015
guest Mind you, that's with an as-good-as-done take-over deal with Tesla. Last October they raised money at 5.45% with a 15 year maturity rate... Enough said about how severe their cash position is.
My bet is on "they don't have the cash".�
1/1/2015
guest How Storage Could Transform The U.S. Power Grid | OilPrice.com
There's some good information in this to help understand potential uses of batteries within the grid.�
1/1/2015
guest It may be better for Tesla to buy up the bonds at distressed prices. It's in Tesla's interest to allow the market to underprice both equity and debt leading up to the acquisition. So we can pretty much expect all the ugly to be on full display for a while.�
1/1/2015
guest What's the arbitrage opportunity? How does a trader use this fact to make an arb trade?
Oh, and Solarcity isn't and has never paid 25% yield. The bonds you are talking about were issued with low yield, like 1.5%. That is what Solarcity is paying on them. However, people have been selling these bonds at below par value, making their current yield higher, but that has nothing to do with Solarcity directly.�
1/1/2015
guest I think that the idea here, is that you can buy the bonds that are yielding 12% based on what you pay for them, and retire way more than you lend out, when you borrow at 6%.
(Making up an example).. if the bond originally pays 4%, a $1000 bond is paying 4$/year. If it's now paying 12%, then that's because it's selling for $333.
If you can issue new $1000 bonds paying 6%, then you can issue a $1000 bond paying $6/year, and use that $1000 to buy back 3 of the bonds selling for $333, thereby retiring $12/year in payments. For the company, they trade in $12/year in payments for $6/year in payments, while also reducing their outstanding debt from $3000 to $1000.
That's the arbitrage opportunity.
For something to yield 25% today that pays 1.5% on face value, I think it would have to be selling today for 1/20 of it's face value. If Solar City can issue new bonds at 6.5%, that looks like about a 4 for 1 trade in.
Anyway - that's how I understand it.�
1/1/2015
guest No, it isn't that simple. You are forgetting that bonds have a maturity date. The Solarcity bonds that are currently yielding about 12% are selling for about $80 (out of $100 par value) since they still have three years left on them. IIRC, the coupon on them is around 1.75%.
Anyhoo, you were talking about an arb play that Solarcity could undertake, and I thought you were talking about an arb play investors could do.
I very much doubt Solarcity wants to retire debt they are paying 1.75% on regardless of any possible arb play. They want/need more debt, not less.�
1/1/2015
guest yes it was about SCTY's arbitrage
an example was a iron miner called Fortescue, Fortescue buys back bonds in a strong September quarter late 2015/early 2016 they were buying back their bonds at a good discount. Why, because they had confidence in their outlook that the wider bond market did not share. particularly in regards to getting their costs down.
Anyway, it was a smart move, it really set them up�
1/1/2015
guest Ok, but I still don't see an arb play. Fortescue had a debt target they wanted to get down to. They had the cash to buy back debt, and buying it back at 80% of principle made a lot of sense rather than paying 100% principle in three years. If SCTY generated excess cash flow and didn't need more debt, it would make sense for them to do the same thing.
Unless things change, however, both SCTY and TSLA need more cash in the near term, not less.
Thanks for pointing me to that Fortescue article though. Gosh, seems that if a company is buying back its debt like that, and their bonds continue to trade at $80, seems like a screaming deal to me as an investor to buy those bonds.�
1/1/2015
guest $100 million new Solarbond.
Elon Musk buys $65 million worth
Lyndon Rive buys $17.5 million worth
Peter Rive buys $17.5 million worth
Amendment No. 1 to Prospectus Supplement No. 23 Filed Pursuant to Rule 424(b)(5)
Comments?�
1/1/2015
guest Elon doesn't have $65M in cash lying around, and I suspect the same of the Rive brothers. Whenever Elon buys large chunks of stock/bonds, he borrows the money from Goldman Sachs using his shares in Tesla as collateral. If he keeps doing this (and he isn't near the danger point ... yet), he risks creating a leveraged house of cards that will implode if Tesla stock tanks. He is playing with fire when doing things like this, and the market WILL take note if he ever gets close to the danger line.�
1/1/2015
guest That's a pretty bold statement. How do you know how much of SpaceX income does he get to pocket?�
1/1/2015
guest I can guarantee you Elon has not taken out anything close to $65M from SpaceX. I suspect, but don't know, that he is doing the same thing with SpaceX as he has done with Tesla. Ie. Not sell any of his stock and instead borrow against its value. But hey, believe what you want.�
1/1/2015
guest Elon is worth something like 12 billion in current market assets. If he collateralizes 5-10% of that he is hardly at a major risk of being margin called. Even if Tesla lost half its market value, as long as the company stabilized his lenders shouldn't care much. And then of course Spacex is doing well so he could always back up loans with spacex equity as well.�
1/1/2015
guest I think it is more telling that he has to do this. Capital markets for SolarCity are completely shut.�
1/1/2015
guest That's $100 million of the short-term financing needs accounted for. Unfortunately I'm not sure how large the total short-term financing needs are so that makes it hard to put into context.
I have said before that SCTY has substantial short-term refinancing issues. The switch from PPAs and leases to direct sales and loans should substantially reduce the *ongoing new financing* needs, but the old PPAs and leases were mostly not financed for their full duration and are therefore facing refinancing. (The ones which are financed for their full duration, or "fully monetized" in the SCTY report parlance, are not much of an issue from a financing POV, but that's nowhere near all of them.) I'm not sure whether this new Solarbond is refinancing old stuff (I hope so) or financing more new PPAs and leases (I hope not).�
1/1/2015
guest I honestly think this is deliberate "go-away" pricing. Tesla doesn't have the ability to produce in volume at this time, so they set a high price to chase away all but the most desperate customers (and to grab extra money from those customers). Remember the "Signature tax" for those who were desparate to get their Tesla cars earlier?
I expect a lower price to be offered once Tesla is actually producing a reasonable number of batteries at the Gigafactory.�
1/1/2015
guest When they say they were "sold out for 2016" did it mean they would only produce a few dozen and that's it and pretty much mis-guided on their revenue income for Tesla Energy for 2016? It's not a good thing when officers of a company misguide sales using non-transparent phrases like "sold out for..." without a unit scale and then guesswork for revenue ramp.�
1/1/2015
guest Why can't he or any officer hedge their shares with bought Put options or they just sign them as collateral to GS and then they arrange intelligent put-spreads against them? And all the while, can be selling well OTM Calls against them for lunch money?
Be careful of judging SpaceX as "doing well" unless you know their private financing numbers. Also, NASA is moving up the Mars mission to 2021-2022. There could be drama and other things that cause programs to be changed, etc. SpaceX is no "cash cow" other than for satellite launches and cargo to ISS.
They got a billion in general cash in 2015 this way (but what are the terms?):
Financing Round
In all likelihood, the plan will be to IPO SpaceX before the Mars mission(s) occur - perhaps 2018-2019. If financial markets are healthy, they could generate 5 Billion+ because of "coolness". But what is the true value of such things as Mars missions to the general population? Mars cannot be terra-formed but it can be something interesting to do - like the moon missions. We'll learn "something" - but how much more than what we already know? And yes, I know about using Mars as a waypoint for further missions if they can establish a method to manufacture rocket fuels on Mars from water (electrolysis - O and H2). Then using other solids like Cobalt-Uranium type fuels, alter the future of space travel. But jeez - who's going where and why? I'd rather see activity in the area of electrically bending of gravity than new forms of thrust.
http://gizmodo.com/5992441/how-nasas-nuclear-rockets-will-take-us-way-beyond-mars�
1/1/2015
guest All indications are that Tesla Energy is a big dud. Lots of excuses, but bottom line, very few sales.
On the Powerpack front, here's an interesting article about some emergency battery storage projects being implemented right now in California. If you click through to the RFPs, you find that not one of them is using Tesla batteries.
California Utilities Are Fast-Tracking Battery Projects to Manage Aliso Canyon Shortfall�
1/1/2015
guest I can't argue with that point at all. For all of the TE will be bigger, as well as faster and easier to scale than cars...more fallout from a shockingly lackluster 2016 from both companies.
SolarCity to lay off 108 workers in San Mateo, San Francisco
Elon Musk, SolarCity execs to buy most of SolarCity bond offering
�
1/1/2015
guest There are a lot of homeowners who have 4000sq ft homes in California - many million dollars in value. They'd surely want to have a powerpack (not bunch of walls) setup as their standby power. And at $25,000 per unit (well, you need that $55,000 inverter, though as well and labor and other goodies) - why not? Even at $44,500 - not too bad. Except that $55,000 inverter. (I know it is 52,500 but I am throwing sales tax on it for various states). You can energy Arbitrage up to 100 kWh for one box and if the grid goes down, you can have a substantial standby power. Not sure if it will run the pool pumps and pool heater - so get a 2nd one for that.
So, why is it that a Powerwall can go into a home but not a Powerpack and a reasonable 20KW max-power inverter? Could run a house for a few days on that and with solar, for years. You'd think hollywood types would be lining up for "home standby systems with good size to run our 3000-6000 sq ft hillside homes".�
1/1/2015
guest This article stands out for me due to the names that are missing from the discussion.
http://www.nytimes.com/2016/08/24/business/energy-environment/as-energy-use-rises-corporations-turn-to-their-own-green-utility-sources.html?ref=energy-environment&_r=0
�
1/1/2015
guest Well, they apparently sold 50 powerpacks in the U.S. in 2015.
But the two big issues is software/inverters not being finished, and Tesla probably deciding not to invest in the "old way" of producing powerpacks.
But Musk's ability to announce guidance, not meet guidance, and never mention explain is extraordinary and unique to Tesla. Major skills displayed here. What happened to cash flow neutral in 2016 for Tesla energy? What probably happened is that they have now actually developed real post merger budgets. So we are now probably expected to forget the assertion that Solarcity would not have a negative effect on Tesla cashflow.
Selling solar ands storage with electric cars is probably a good idea. But more risk and the doubling of Tesla employees is in no way contributing towards a more financially stable Tesla over the next three years.�
1/1/2015
guest Who cares? Has he failed to deliver on any phase of his vision? The reason people don't mind the delivery delays of 6-18 months on various products is because this company is single-handedly changing the energy dynamic of the nation. If you're going to push boundaries, you need to set crazy moonshot timelines to avoid stagnation.
Solarcity was financing PPA installs at over 100% of install cost for the hot minute that the business model was rolling, so with a slimmed down sales approach from Tesla that unit should be wildly profitable in any market that is scaled.
Where is the risk in becoming the energy and personal transportation supplier for the wealthy(and then everyone)? If that's risky, then what is Space X? Elon's entire plan is predicated on massive amounts of calculated risk and pushing through his agenda at all cost. It hasn't failed yet and he's clearly now over the hump and nearing untouchable status, hence the investing world does not get flustered.
Pulling back and trying to pump out millions of Model 3's as profitably as possible is likely not in the gameplan.�
1/1/2015
guest
"Directors of customer service, inside sales, legal operations and recruiting will be laid off, according to the company. "
OK, we can already see that they're transisitoning sales and service to Tesla in anticipation of the merger. I'm a little more disappointed about SCTY firing their "director of legal operations" because it seems to me that Tesla's legal department is awful and SolarCity's was significantly better (so you know what I would have done).�
1/1/2015
guest "In an emailed statement Tuesday night, Lyndon Rive said they invested in SolarCity�s bonds �because it�s a very efficient way for the company to raise capital without paying expensive banking fees.� "
The banking fees *are* expensive. I've been shocked when I've looked at them -- they can amount to 1% or 2% or even 3%. When you look at the overall interest rate being paid, this is a huge overhead cost. I'm actually surprised that any company sells through underwriters given the enormous skimming the underwriters take off the top.�
1/1/2015
guest That's right. This whole lay off story is to push no voters to vote yes on the aquisition.
Now info comes out that it was 108 HQ people out of 15000 employees is a non issue as far as the business health. This is a straight transition-redundancy let go.
The narrative to voters is "vote no at your peril and the peril of Solarcity and Tesla's future in accelerating the advent of a sustainable energy economy." In effect, this whole process has hobbled solarcity's ability to function on its own, so there is no choice but to accept the $25/share offer for those thst own long term positions (still). Still is key now because I'm thinking many long term holders have sold and now many current voters may be holders at sub $25/share. So a yes vote is inevitable, Elon et al know this and are acting accordingly.
As we've learned, Elon is a pitbull when he decides on something and this is no exception. All you have to do is remember the story when he was kid after his mother refused to drive him to see friends, he left the house and walked the 7 miles himself.(paraphrasing from memory).
This trait is both good and bad. As he achieves more influence, this trait requires some wise restraint or he'll just become another self created despot and everything will begin to backfire in the grand scheme.�
1/1/2015
guest It's ... interesting that SolarCity is paying 6.5% interest for an 18 month loan and that insiders will benefit from this. In a way, Elon just siphoned off $6.3M from SolarCity/Tesla in the form of interest payments to himself.
Yes, anyone else in the market can also take advantage of this (you too can buy these solar bonds), but Elon is uniquely positioned to make sure that he comes away whole. If I buy the bonds, there is nothing I can do to make sure they don't default. Elon has a lot of ability to make sure they don't default.
Anyways, speaking from an investor position, maybe these bonds are a good deal given this...�
1/1/2015
guest Wonder if that $6.5M interest payment is included in the $150M promised synergies�
1/1/2015
guest It's also interesting the money the Rive bros are putting in is essentially the ~$40mln they made from their scty stock sale at $50-60 a couple years ago. Now they are making a fantastic rate of return on top of the brilliant stock sale.
All they had to do was forgo 5 months of 275k salary in PR capital for it.�
1/1/2015
guest Perhaps. It's a small market. Tesla would have to engineer a new type of inverter. The one that currently works with Powerpacks is a 3 phase, high power inverter. You'd have to configure a single phase, lower power inverter for the Powerpack. Can be done, but probably not worth it for Tesla.�
1/1/2015
guest Doing well as in Spacex's last equity raise was in such demand that they turned down investors. And Steve Jurvetson kind of mildly complained(early spacex investor/VC) that Elon asked him (and presumably others) to sit out the round to make room for other new investors. They also have a huge contract order backlog and recent flights are going so smoothly the media is starting to show signs of boredom with successful spacex launches and landings.
I doubt Musk will IPO Spacex before Mars mission success unless he has no other option. And if Tesla is successful into 2018-19 Musk will be so wealthy he likely wont need to.�
1/1/2015
guest They already exist. Hundreds of inverter models and companies exist out there that can essentially power a house or at least 10KW-20KW off proper battery banks. This is old hat. Not now, likely, but down the road. Those who have built home-based large scale battery backup systems have spent upwards of a Million to do it. The inventor of the Clif Bar has his house on an off-grid system the size of a tractor trailer. One to two powerpacks could do it and a few inverters. If the powerpack could be wired at 48V, the Schneider Conext XW+ equipment, among others, could do it.
Here is a 35 kWh type system 10 kW solar array, dual 6000 Watt inverters, with a 800Ah 48Volt Iron Edison battery
Equivalent to a 6 PowerWall system - Including the solar panels, but no labor, about $75k. Iron Edison batteries can be abused and will outlast the electronics in this system.
This is the kind of system that could be simplified into one Powerpack, a good charger, a good inverter and simpler installation. 100 kWh through a 6KW-10KW inverter would probably do a great job of off-grid living as long as it could maintain daily recharges. And if not, go parallel with 2. The market for off-grid large homes should be thriving due to everyone being convinced to "get off the nasty power company!" cultural meme going around.�
1/1/2015
guest Thought this might be of interest.
�
1/1/2015
guest First off, Elon has clearly stated that SpaceX will not IPO any time soon. If he can he will keep it fully private until he retires. If he does choose to retire on Mars and the flights are regular and the cash flow is clear he may then IPO the stock, but he doesn't want in a space launch business see any kind of Q-to-Q bullshit from Wall str. Also, precisely the whole Mars plan is not necessarily a financial goldhole and is more of a legacy and future of mankind thing, hence no IPO before that for sure.
With regards to income cash flow that will be easier, the company is launching more stuff to orbit than all other providers combined (stats from this year and this will get even more profound as time passes and launch cadence is upped as it seems to be happening). Add to it booster reuse and the whole competition is in serious trouble as there is no way they can match pricing and will only exist as safety options for launch buyers who don't want to bet everything on one booster in case something happens to it. But make no mistake, 2017 SpaceX is likely to launch 60% of all global launches and 2018 I wouldn't be surprised if it's 70+% etc. They have their own satellite constellation in the works where the reusable boosters will be of huge benefit and they'll start launching weekly some time in 2018 or so.
Add to it BFR that's likely to be introduced in a month or two and it's pretty much game over in the launcher business for all of the competition.
So no, cash flow is not a problem�
1/1/2015
guest Mars is the future of mankind? We can't maintain this planet well, Mars has no magnetic field. It's a science fair and most of the cool kids are hanging out at the playground. Mars is someone's future but most likely it is a field of study for the next few hundred years by a select few. Thrust-based rocket engines burning stuff is not going to make for constant space flight forever. Yes, you can burn baby burn (ie. drill baby drill) rocket engines every week but the real answer is elsewhere, probably in some form of electrogravity augmentation. Electrogravity�
1/1/2015
guest I went and tested that link. First of all I was somewhat repelled by the ads for comics and fantasy movies etc. Then I noticed that a majority of the internal links pointed at "page does not exist", with the exception of some articles and stuff like Nikola Tesla, photoelectric effect and other well-known things. The main thrust (pardon) of research appears, at a casual glance, to have occurred 60 years ago.
Is any of this realistic at all? It sounds a little bit influenced by "Area 51" etc. From one of the linked articles:
�
1/1/2015
guest Cell phones were "magic" in 1960. (though, they are simply radio waves, not energy transfer)
TSLA is constantly compared to AAPL and AMZN in the early days.
Electricity binds the entire universe together.
What's not to believe that electricity plus magnetism can be used to manage gravity/anti-gravity?
It just so happens that scientists have not yet figured out what gravity actually is.
it's 2000 but Netflix has a very interesting video to check out - "Einstein's Biggest Blunder". And I believe that some of the math being done in europe will help solve some energy equations that may take us closer to utilizing the power of molecules and atoms better without splitting them. NASA and SpaceX are already looking into using Cobolt and Uranium for rocketry - mixing new ingredients to create ion-based engines.�
1/1/2015
guest OK, but ion reaction propulsion is absolutely not the in same category as anti-gravity -- be it electrostatic or not -- it's just pushing stuff out at high speed at one end to move the vehicle in the opposite direction; and it actually works, for well understood physical reasons.
As you point out, however, the nature of gravity is not entirely satisfactorily explained, yet. One day it might well be, and then we can have a productive discussion over it. In the mean time I don't think it's very helpful to point out fantastic, unproven hypotheses from last century when physics science has taken such great leaps forward. Even though it may be fascinating as a witness of that era.
Perhaps there is a link to electromagnetism. Or not. Perhaps we will find out in our lifetime. Most probably not on this board, where it is seriously off topic, so I'll just bow out here.�
1/1/2015
guest Yes yes, plain as day I can see how falling panel prices will hurt a vertically integrated company like SolarCity's sales...err Tesla...or is it Rive, Rive and Musk Financiers Inc. now? /s
As manufacturers ramp up production, solar industry could face a panel glut
Solar Industry Braces With Looming Glut Eroding Panel Prices�
1/1/2015
guest On the map, I think we could power the country using the area of just one pixel if we solve zero-point energy. Nikola Tesla was working on it. It is time to start to get serious about energy that is not "reactive" (burnt). Think about the force that holds you in your seat at the desk. 100% of time. Always there. There should be a way to utilize such forces for power generation and/or travel. We'll get there. I think by the year 2200, a plurality of the world's energy production will be based on such technology. I will bet a friend on that one.�
1/1/2015
guest This is the problem with businesses without significant barriers to entry. Large market size and growth doesn't translate to profits.
Tesla will try to re-brand and differentiate solar and storage, but it is a terrible time in the company's growth to try this experiment.�
1/1/2015
guest There is, my friend: hydro.�
1/1/2015
guest This is very true, but not at the scale we all need on the planet without governments allowing far more dam projects. I grew up within walking distance of 4.6 GW of hydro. And I am wondering what happens when Hoover Dam goes TU and can't produce.�
1/1/2015
guest Just to be clear.....the entire planet is with 99% certainty transitioning from combustion-based energy to renewable sources plus storage.....and you think it's a terrible idea to become the Apple of that?�
1/1/2015
guest Ok, let me put my PhD in experimental particle physics hat on (the same one I used when I partook as a member of the huge team who discovered the Higgs boson a few years back ... You can look up the paper and author list).
There are absolutely no viable clues to the origin of gravity beyond it just being an effect of the metric of space time. There is no viable way to extract what you call the zero point energy under which I assume you mean vacuum energy or the energy that supposedly exists in vacuum that is balanced out of all quantum field theory equations as the zero point on top of which all interactions happen as perturbations lest the calculations always return infinity as a result for energy and any other variable.
Yes, this does not mean such a way couldn't be found some time in the future, but this board is about practical and tangible stuff. Hell, we don't even know what gives mass to neutrinos, we don't know what dark matter entirely consists of even (beyond planets, neutrinos and black holes, but those aren't enough) and my specific field has been in those topics.
So no, let's get back to real world stuff. The stuff I work on besides Teslas usually may or may not bring tangible results, but we're talking about tens of decades if not centuries....�
1/1/2015
guest Anyway, I like your handle.�
1/1/2015
guest It's an example of possibilities. Quantum physics. There are a good variety of things to look at in terms of anti-matter and trying to excite matter to alternate between matter/anti-matter to somehow create energy out of zero-point. Possibly the Baryon asymmetry. But until that can be "contained" and the right elements involved, it'll have to wait.
So, given so many things are unknown - how can it be "so certain" about one company or another in the ludicrous, I mean cultural/humanistic chaos, that is our humanity? One day nothing and the next - millions of people are zombies playing Pokemon Go?
The Higgs was a good stepping stone as something to be "found" but we do need to figure out stuff that is truly useful.�
1/1/2015
guest Uncertainty, certainly. But one certain thing is that the Higgs was demonstrated some 50 years after that article on electrostatic flying saucers that I tried to read from your link above. Shall we try to agree that the laws of physics are not actually subject to popular polls? No matter how hard the New Age-ists protest.�
1/1/2015
guest There will be no Apple of renewables any more than there is the could be an Apple of whole wheat bread or corn. Why not promote the idea that Tesla should dominate the corn market? Corn is a fragmented multi billion dollar business. How about garage door replacement? Or maybe water heaters?�
1/1/2015
guest So many bold statements about what can, can not, will or won't be being made by people not in the know. Unless of course we're all friends of Dion?�
1/1/2015
guest ![[?IMG]](https://d2i0sljjkrkazd.cloudfront.net/production/link/image/184270/twenty_by_nine_extra_large_1e68f34f-2a0c-4dfd-9563-5a1e96c74503.jpg)
�
1/1/2015
guest SolarCity construction nears completion - The Buffalo News
�
1/1/2015
guest Thanks for the informative update! However, in the next para the article ends with:
so I guess it's the new product that takes more time to perfect than the more traditional panels originally planned.�
1/1/2015
guest So, Buffalo is *starting* with roofing and not industry standard modules? isn't that a harder market to serve rather than making industry standard modules that all installers can use - especially if highly efficient? I'd think they should start modules and perfect roofing while doing module runs.�
1/1/2015
guest My guess is no better than yours. Maybe they simply need the factory space for machines making their own, new and unique product, at least to begin with? Maybe they prefer the higher margin of vertical integration to supplying the competition with superior but standard format panels? (They could always continue to buy off the shelf for the traditional business.) Maybe they simply can't satisfy demand anyway (production limited, remember Tesla Motors)
We cannot really know but as investors just have to hope management knows what it's doing during this transition. Me, I'll stay in a while yet. YMMV. Only my idle speculation, not investment advice.�
1/1/2015
guest Very unlikely.
The price of solar is dropping far faster than can work for solarcity. There are people in Socal reporting offers for a little over $2/watt. What we are seeing here is Musk scrambling for a strategy. What may be most important over the next 12 months is that a portion of the investor community believes that Musk has a differentiated solar product that can be sold profitably in volume. But the chance of a truly successful new product is probably 1 in 20 at best.
Tesla is about to double its employee count by taking on a failing business. Tesla is going to have to be damn lucky, or ruthless, for this not to end badly.
I find it unbelievable that they kept growing solarcity into the crapstorm that was obviously coming. I suppose they thought that the ITC extension made them safe for the rest of this decade.�
1/1/2015
guest What I find interesting is the SolarEdge inverters which allow for 5000W of backup power from a Solar Roof (PV modules or otherwise) even without a battery. That product could introduce a combined "power center" into a new home construction to allow 5000W of power circuits set aside from HVAC and allow a house to become "nearly self sufficient" powerwise, withstand grid outage right from day-1. Two inverters can be put together and maybe an east-west stance of panels allows 6000W+ of power from 8am to 7pm or longer (with 10kW mid-day) with enough solar PV up there.
If the roof is cheaper to install at construction time and tie-in with electric work at home construction, they can do thousands per month in installations - if the industry accepts it. Now, are thousands per month capable of sustaining this wing of the company or is it something that only works in California and Austin and maybe Long Island, that is the question. The ITC 30% should apply to such a system and inclusive of the battery too if the solar roof charges the battery in the morning to be used in late afternoon.
The installed price of a "whole home system" is one thing. But TeslaCity needs to make the system priced for distributors and installers and that means far less margin. Perhaps 10% margins to compete with choosing it over GAF and other roofing shingle companies for home-builders. And who gets the ITC - builder? homeowner? How does that work out? I suspect homebuilder and they can buy the product at wholesale prices - price it at "market prices" for a solar system and do pretty well with ITC payback if they are a profitable company. There are a lot of ways to build schemes and homebuilders are always looking for ways to make a buck out of pricing in profits into the input parts.�
1/1/2015
guest google.com�
1/1/2015
guest asdasdasdsa�
1/1/2015
guest google.com�
1/1/2015
guest Correct. Musk's been pretty honest about this; count how many times he said "differentiation" in the recent investor phone calls. If they've (a) got the pricing they originally claimed for the panels for the roofing product, (b) have a roofing solution which is satisfactory to the building trades (I do hope they consulted experienced roofers!), (c) have sufficiently low installation costs, and (d) slash sales costs, I think they'll actually have a decent product at a price where they can sell it. They're aiming hard for the SunPower market and they're going to undercut SunPower substantially on price.
He also said he was expecting to sell bundled batteries with 100% of systems, at least in the longer term. I would not be surprised to see the complete solar roof + battery product released as a single product some time next year.
I'm currently betting on ruthless. It sounded to me like Musk was slavering over the Silevo factory. Which has repeatedly cut its manufacturing employee count, so it's getting more and more automated. It seems absolutely clear that they've written off the PPA and lease business as a bad business. And the repeated statements about "cutting cost of sales" clear mean they're going to fire most of the salespeople.
Which raises an interesting point. They promised New York that they'd employ a certain number of people in upstate NY. With the cut in manufacturing jobs, the replacement plan was sales and installation jobs. But those sales jobs are now going to be cut too. Perhaps after the merger with Tesla they'll open several Tesla service centers in upstate NY and count those as the promised jobs -- I can hope.�
1/1/2015
guest I know I'm interested in the idea of an integrated solar roof / battery / slightly able to go off-grid during power outages type of product. I don't know if it'll be affordable, but plenty interested enough to make some phone calls and price it out when it's available.�
Sep 12, 2016 at 4:35 AM
electracity When I priced an automatic backup generator plus ten years of service it came to about $20K. While I'm sure that price can be beat, there is still a substantial long term opportunity for solar plus battery to compete in that market. In areas with expensive houses and basements almost everyone eventually learns that sump pumps need backup power. Many people on the east coast who went through Sandy would consider such a system rather than a generator.
So I think long term Tesla offering solar plus battery system that can make some money back doing rate arbitrage plus provide backup power will probably become common in better housing. Tesla should eventually be well positioned to address this upscale market. Selling environmental benefit + energy security + cool tech stuff should be a good business model if the product is differentiated from lower cost competitors.
Tesla's problem this year is 14,000 new people on the payroll now who are not currently employed in profitable business activity.�
Sep 12, 2016 at 4:56 AM
MikeC Link for these reports? I just had a system installed and could not find lower than $3/watt. Are you speaking about pre- or post-incentive price?�
Sep 12, 2016 at 7:11 AM
electracity The lowest reasonably credible report I saw last week was $1.80/watt for a 20 year lease with the lessor keeping all incentives:
Solar panel lease @ $1.8/W and no monthly payments � /r/solar�
Sep 12, 2016 at 9:50 AM
MikeC Okay, it was a little confusing because you're quoting a deal for a 20-year lease which includes incentives as if it was a straight cash sale price of $2/watt.�
Sep 12, 2016 at 10:36 AM
TheTalkingMule As opposed to the existing employees?�
Sep 12, 2016 at 11:55 AM
bonaire When computing arbitrage, do consider annual build-up of internal resistance(IR) of batteries in each year. A 6.4kWh battery SOC may degrade to 5 or less after 8 years (when daily cycled). Warranties don't entirely hold up long term and there will be expense in battery replacement roughly at the same time as string inverters (such as the SolarEdge string inveters) - years 10-14 or so in the life of a system. Maybe $3000 will buy a new battery pack replacement of 10kWh to fit into the same casing. Part of the arbitrage earnings should be banked and invested in order to facilitate system maintenance in the mid-term. Companies like Enphase have offered 25 year warranties - and yet have a lot of infant mortality of micro-inverters. It's hard to tell if Enphase will survive - they are also looking at battery systems too and will be interesting to see what they do with that.
I would have liked to see Tesla offer a battery pack for homes larger than a 6.4 kWh battery. It appears that two can be chained to one SolarEdge inverter - and then you need another inverter to add more. A 15 kWh battery pack would have been more appropriate of a size but would of course come with double the price, if not more. Maybe in the next design, they can offer a larger block.�
1/1/2015
guest There are low-salary jobs that can be run out of Buffalo rather than Silicon Valley or CA at all. The DS jobs for handling deliveries, even IT can be moved to Buffalo. Cost of living there is half or less that of California (even with a similar sales tax). Living in Buffalo isn't for everyone but something has to be done to fill chairs in NY State. Buffalo is known for banking and customer service - also collections. Surely they can staff "customer touch" type jobs as DS, OA and others in a lower-cost region like WNY. But people who want to work at Tesla may want to be in the Bay area. Thing is, to live out there, you basically are mortgaging your own future on living expenses.�
1/1/2015
guest This lease is potentially more expensive from the installers perspective. I presume it is offered for buyers who can't use the full ITC.
The finance part of this deal is curious. Obviously the installer is willing to take only a very small profit. But the installer is sophisticated enough to bundle financing.
My overall point is that a national company like solarcity cannot begin to be competitive in this space. A little local company can't build EVs to compete with Tesla, or smart phones to compete with Apple. But they can destroy solarcitys business.�
1/1/2015
guest Do we know how many of SolarCity's 13-14,000 employees are the installation team and how many are sales and marketing?�
1/1/2015
guest I don't know. Anyone else know? It certainly doesn't pop up on a quick Google search.�
1/1/2015
guest Gov. Cuomo Calls for More Private Investments to Help Make Buffalo Great Again
�
1/1/2015
guest The leasing business. The installation business. However, Musk clearly has his eye on the manufacturing business which hasn't even opened yet. A little local company can't compete with that; the question is whether that can compete with cheap Chinese solar panels. Something about which I am not sure.�
1/1/2015
guest Cheap high quality American panels installed by a trustworthy major company will win out over cheap Chinese panels installed by a local company that may disappear in 6 months. Even with the 10-20% premium. To me that's a bargain.�
1/1/2015
guest As America�s Top Utility Regulatory Body Overhauls Rate Design, Solar Players Want More Transparency
�
1/1/2015
guest SolarCity Raises $305 Million in Latest Cash Equity Financing�
1/1/2015
guest So, this is money they don't owe? They said it's non-recourse.
Also:Does that mean $2.1 billion won't have contractual payments? Why not? Where does that expected money come from?�
1/1/2015
guest This is another case of monetizing the payment stream from the PPAs and leases.
As you know, SolarCity has (in the past) leased a lot of panels and sold a lot of PPAs. The problem with these deals for SolarCity is that SolarCity spends all the money up front, but gets the cash very slowly over the course of years. This is why I described SolarCity as having a large banking operation; they were spending money upfront and getting paid back over 20 years, which required constant refinancing.
This deal is basically SolarCity selling the rights to the future payment stream on a basket of leases and/or PPAs in exchange for cash up front. There was a similar deal earlier this year, but at a worse price. These deals consist of SolarCity getting *out* of the banking business. The institutional investors are now providing the upfront cash, so that SolarCity is getting paid for the costs of panels and installation *now*.
As long as SolarCity can do these deals, they won't run out of cash for quite a while.
For this basket, it looks like they now have (a) an "equity" investor who collects the tax breaks and pays SolarCity upfront for slightly less than the value of the tax breaks, and (b) a "lender" who is paid back by the cashflows from the homeowners over 18 years, roughly the same term over which the homeowner is paying SolarCity. They've matched durations of lending and borrowing so they're no longer facing the sort of financing risks which banks have, at least not on this basket.
Since it's "non-recourse", this means SolarCity doesn't legally retain default risk either. (Though in practice I think they'd end up retaining default risk, because every time a packaged securitization deal fails due to default, the sponsor ends up bailing it out for reputational reasons.)�
1/1/2015
guest This is actually the first good news out of SolarCity since the take-over was announced. Derisking is good when you have huge liabilities, but how much of the future revenue stream this will eat is not clear to me. Anyone can clarify?�
1/1/2015
guest I can't do the calculations on that. The cost of capital here is 7.4% which is slightly higher (worse) than the discount rate of 6% which SCTY has been using to "value" its future income streams. But I think most investors were not taking the future income streams seriously, and this is cash in pocket, which is better in many ways.
The improving rates on each subsequent deal are a very good sign; they may get it down below 6% with the next deal if they're lucky.
Regardless, for people looking at cash flow rather than long-term earnings, this is going to make Q3 look much better than expected. They basically moved $305 million in cash flow into Q3 from, well, much of it was from 20 years down the road.�
1/1/2015
guest I don't trust their 7.4% cost of capital figure. That might have many many many assumptions baked into it.
Here is a better way to look at it. They raised $305mln on 230megawatts. That's $1.33/W.
From the latest investor presentation from Q2 ER, they raise $1.65/W in Tax Equity.
Bringing the total receipts to $2.98/W
While the same investor presentation shows the cost to be $3.05/W.
To make matters worse SCTY is additionally on the hook for O&M, which management estimated at one point to be 2cents/watt/year on average over the life of the install.
Essentially this transaction proves once again that SCTY loses money on every install, this is not even including R&D, CAPEX and any other corporate level expenses.
Market is happy that SCTY still has some avenues of liquidity but truth of the matter is that it is a money loser (different from Tesla, where S and X would be profitable standalone).�
Sep 12, 2016 at 12:39 PM
30seconds SCTY has option to increase mgmt cost on the contracts and keeps residual value of the systems once the $305m is paid off.�
Sep 12, 2016 at 12:53 PM
schonelucht Hmm. I really don't know enough of SCTY to argue with you there. But basically if that's true then Soros is just picking up debt in distress for 80 cts on the dollar? I just realise another thing : no word on the relative quality of the underlying contracts. Is Soros acquiring a representative portfolio or is he cherry picking the best customers?�
Sep 12, 2016 at 1:12 PM
Turing Could this combined with other cost reductions give them a chance at being positive FCF for Q3?�
Sep 12, 2016 at 1:43 PM
TMSE In the press release today http://files.shareholder.com/downloads/AMDA-14LQRE/2824162633x0x907735/D31908FA-2F2F-4C1F-BD65-6AE2BEEB144D/SCTY_News_2016_9_12_General_Releases.pdf
Does the 6% discount rate denote debt servicing cost? Is this $3.1 billion cashflow after servicing the corresponding asset-backed debt on SolarCity books? Correct me if I am wrong, but I think it has to be after servicing the debt because original debt issuer must have covenants in place to ensure the servicing of these asset-backed debts from the cashflow before they are appropriated for any other purpose.�
Sep 12, 2016 at 1:53 PM
Lessmog Alert just in:�
Sep 12, 2016 at 2:28 PM
TheTalkingMule How is this any different than Model S&X? Are both entities not attempting to expand exponentially? Is one Gigafactory different than the other?
Sales costs were last reported at $.91/W after the Nevada pullout. Prior to that it was $.57ish on its way downward. If SCTY just sat and churned in their established and most profitable markets they would be simply printing money right now. That's not the plan.
They make money in mature markets and lose boatloads in all new ones while consolidating share and scaling efficiencies.�
Sep 12, 2016 at 2:45 PM
trentxintong Also, keep in mind, SCTY has yet to expand to markets which electricity is much more expensive than the US, e.g. Germany, Australia, etc. I think they will be able to make more $ per installation there.�
Sep 12, 2016 at 4:39 PM
renim
thats funny
one of the core reasons why Germany and Australia have such high rooftop PV is exactly because SCTY is not here.
yes solarcity has some office somewhere is Australia for talking to governments, but humans don't deal with Solarcity, we prefer value.
![[?IMG]](https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/116152/width754/image-20160323-28072-19k2p6b.png)
�
Sep 12, 2016 at 4:53 PM
trentxintong what sort of value do you think solarcity can not offer there ?�
Sep 12, 2016 at 4:54 PM
trils0n Solar City's installation costs are dramatically higher than the local installation costs in Germany and Australia, so they wouldn't be able to compete. Unless the merger with Tesla cuts costs in a huge way, they won't have any presence in markets with low installation costs.�
Sep 12, 2016 at 4:56 PM
trentxintong OK. Are their panels cheaper or they spend less on customer acquistion ? what results in this price difference.�
Sep 12, 2016 at 5:24 PM
TheTalkingMule It's entirely sales cost and combating regulatory corruption. Germans do not(and never did) pay for sales costs, once the legislation making solar financially advantageous went into effect they just jumped on it. Call your lifelong electrician, fill out a one page permit and you're done. You can have rooftop solar in a week in Germany.
People act as if SCTY enjoys paying for all this sales effort, it's universal in the US. Ask the local installers in your market how much their sales cost is, the ones in my area were perfectly happy to share the info and it's absurd.�
Sep 12, 2016 at 6:01 PM
renim Costs,
Solarcity has unnecessary advertising and marketing costs.
Solarcity has unnecessary sales costs.
Solarcity has zero scale advantage in choice of buying solar cells.
Solarcity probably has slight scale advantage in buying invertors, but with a corresponding disadvantage in choice.
Solarcity has significant financing burden compared to owner occupiers.
Solarcity has the margin problem that a further intermediary between the installer and the owner creates.
Understand this, my state is around 30% of dwellings have PV. Up and down my street, PV is clear indicator of home ownership vs home rental. The few exceptions tend to be those who self selected a house with unsuitable tree shading.
Everyone who is interested in having PV will ask their neighbour or a friend who already has it. There is no uniformed market left here for Solarcity to take advantage of. Perhaps 5-8 years ago there was. But not any longer. That opportunity is closed.
Tesla energy has a bright future in Australia (batteries) but not Solarcity.�
Sep 12, 2016 at 6:26 PM
renim Ok, we don't have a subsidy on cost, we have a 'bounty' on solar adjusted capacity. Its called RECS or something like that
Approximately speaking, the federal bounty for PV equals of cost of a panel. So we have local deals here where additional PV is perhaps $200 per kW installed (for using the same invertor)
Once the cost of a panel is zeroed out, what left?
the cost of the invertor
the cost of installation
the cost of marketing
all of which is influenced by the cost of financing.
since installation is now such a massive percentage of the cost, why add a further overhead to it? that would be stupid.
The USA subsidy for solar hides solarcity's model's uncompetitievnes
vs
The Australia subsidy for solar magnifies solarcity's model uncompetitievnes�
Sep 12, 2016 at 11:54 PM
schonelucht Really? I live in the Netherlands and my solar installation (end user cost, no incentives) was a lot cheaper in dollar per Watt than the numbers I hear for SolarCity's cost basis. And I didn't even go for the cheapest offer.�
Sep 13, 2016 at 6:00 AM
kenliles I think the real issue is here in US we barely believe in climate change as a whole country
(i.e. associated policies - funding mechanisms - counters to existing interests - etc).
That's why Elon has to resort to explaining it with references like these (tweet today)
@elonmusk: Climate change explained in comic book form by xkcd
xkcd: Earth Temperature Timeline
- there's Dumb, there's Dumber, and there's massive eco-political interests - we have to deal with all three here unfortunately -
It's changing; but slower than the glacial ice is melting;
as a USAer I sincerely apologize to the rest of the world...
[On the other side of that apology, we have Elon Musk and many more leading the way out with gusto and bravado]�
Sep 13, 2016 at 8:35 AM
30seconds Cost of installation between US and EU countries is not a very good comparison. EU regulations in this area are significantly more streamlined than US, as this is handled at city/ country level in the US. See page 23
https://emp.lbl.gov/sites/all/files/lbnl-188238_2.pdf�
Sep 13, 2016 at 9:20 AM
schonelucht Thanks for the link. Interestingly, one of the other differing factors the study mentions is solar industry business models.�
Sep 13, 2016 at 9:21 AM
TheTalkingMule In the US fossil interests have the ability to dictate policy state-by-state, that is certainly not the case in Germany and I assume is much less of an issue in Australia. In Germany you know exactly how much you'll get paid for excess energy pushed to the grid for 20 years, in some of these southwestern US states solar fees and payback can change at a moment's notice. Hence the absurd sales cost becomes necessary.
If residential solar juice were given nationwide grid priority and a stable locked-in payback as they have in Germany, we would be buying super cheap PPAs from SCTY in the majority of states right now.�
Sep 13, 2016 at 12:25 PM
neroden I look at the "monetization" transactions as SolarCity getting out of a bad business model (PPAs/leases). I don't really care whether they get out of it at a profit or a loss, as long as it's a small loss. Once all the PPAs/leases are monetized, SolarCity will no longer have banking (duration mismatch) risk.
Then SolarCity becomes a bet on the Buffalo factory. Make your own decisions on that; I personally am quite optimistic, because right now nobody else is competing in the SunPower "premium" space. The Buffalo factory looks to me like they can compete directly with SunPower at a lower cost.�
Sep 13, 2016 at 12:35 PM
SBenson @neroden, That is if they are actually getting out of them PPAs/leases. They are getting into them as fast as they are getting out!
When majority of their sales are cash sales (or financed by third parties directly to homeowners) then I would feel comfortable.
Current business model is a suicidal rope. Yet, they have no easy way out or else we would have seen it by now don't you think? are they really this dumb to continue with this while fully realizing that they are choking themselves? Under Tesla I expect a fundamental makeover. There will be massive layoffs and the division will re-start much smaller.�
Sep 13, 2016 at 12:39 PM
neroden Good point, but are they? They have been slashing growth. Maybe they are getting out faster than they are getting in. I'm fine with lease sales if they're *pre-financed*, that is, a fund has already committed to finance them.
Yeah. They have stated that this is their goal, which makes me a lot more comfortable; it says to me that the management knows what the problem is and wants to fix it. If they didn't know what the problem was and weren't trying to fix it, *then* I would be very unhappy with SCTY. (As I was until I found those quotes from management.)
Musk did clearly imply massive layoffs in the sales teams.�
Sep 13, 2016 at 12:58 PM
TheTalkingMule I would be willing to wager that the rebranded Tesla solar offering will be of the PPA variety, especially once battery storage integration is more standard. Perhaps a hybrid of some sort, but certainly full service rather than just "install and walk away".�
Sep 13, 2016 at 1:25 PM
Rarity I wonder how big the premium market is or is expected to become, considering that SunPower is valued at only $1.2 billion.�
Sep 13, 2016 at 1:28 PM
neroden Good point. Hard to estimate. I know SunPower panels are popular around here; it really is a selling point and I can think of four installers who use them for marketing value. Musk doesn't want to compete in the cutthroat cheapo-panels-from-China market.
Given the price of batteries -- even after the Gigafactory cuts battery costs -- I think most people who want a home battery system will be in the premium market. Which may have something to do with Musk's thinking.�
Sep 14, 2016 at 6:14 AM
gene SolarCity, Berkshire's NV Energy settle Nevada rooftop solar dispute
Solar City suit vs. NV Energy is settled.�
Sep 15, 2016 at 11:25 AM
stealthology Stupid question, but if/when the SCTY deal goes through, will the price of the actual contracts change? I know SCTY LEAP's become TSLA 'mini' LEAP's, and the strike prices change. Ie. an SCTY 20 strike will become a ~181.9 strike TSLA contract (181.9 x .11).
I'm mainly curious if I'm in a situation where I'm slightly out of the money when the conversion occurs, if there a good chance I could get a pretty large bump in value overnight.�
Sep 15, 2016 at 3:25 PM
rallykeeper I kind of agree with your point about monetization (not sure entirely, though).
I started to make this point in the TSLA Short-term thread, but backed away.
I think the sale to Soros is a really good indicator about the true economic price Tesla is paying for SCTY.
Optimistically (I'm backing into some numbers), it looks like Tesla may be able to monetize all the older transactions at admittedly less than the current 6% discount rate and still produce $1.5-$2 billion in current cash. That's the no-brainer part of this transaction to me.�
Sep 15, 2016 at 4:51 PM
neroden Right. So here's how it works to my understanding.
You have 1 contract for SCTY $20 strike price. (Put or call doesn't matter.) This is a contract to (buy or sell) 100 shares of SCTY for $20 x 100 = $2000.
Now 100 shares of SCTY become the right to receive 11 shares of TSLA.
This becomes 1 contract for TSLA1... This is a contract to (buy or sell) 11 shares of TSLA for $2000. I *believe* it is still listed as a "$20" strike. ($20 x 100 "multiplier" despite being 11 shares.) I could be wrong about this. We'll see when it happens.
The actual *price* of the contracts -- the premium -- will of course vary day-to-day in the market, but after the merger, you'd expect it to be related to TSLA's price.
If the merger goes through, after the conversion whether you're "in the money" will depend on the TSLA price (SCTY won't have a separate price any more). So this is really entirely about the "discount" on SCTY relative to TSLA prices right now.
I mean, obviously it's possible that the day after the merger takes place, horrible news comes out and TSLA stock crashes.�
Sep 15, 2016 at 7:18 PM
stealthology Thanks neroden, you've been a huge help over these past few weeks.
Just to be sure I understand: Let's say when the merger goes through, there's still a 25% arbitrage/'discount' and I'm just barely out of the money. The next day, assuming Tesla's share price holds steady, I should definitely see the premium increase at the very least by 25%, correct? I understand there's many variables at play, but just in a general sense. Thanks.�
Sep 15, 2016 at 7:38 PM
Nomad What happens to SCTY stock when the merger goes through? Does one get $25.37 of TSLA per share of SCTY with any remainders being converted to cash? ... or is it converted at the 0.110 value based on the rolling average at the time it goes through?
Because if one simply gets $25.37 of TSLA, who wouldn't be buying up SCTY shares right now for a quick and easy gain?�
Sep 15, 2016 at 10:12 PM
dandurston You get .11 shares of TSLA for each share of SCTY if the merger goes through. The rolling average doesn't matter since it's based on a ratio, not a price. You do not get $25.37 worth of TSLA for each SCTY share (e.g. if TSLA were to fall to $25.37/share you would not convert 1 SCTY to 1 TSLA). $25.37 is what .11 shares of TSLA was worth back when the deal was announced, but now both stocks have fallen so .11 of TSLA is worth $22.
The ratio of .11 is actually quite a good deal now, with SCTY trading at .085 (e.g. 30% lower). The fact that SCTY isn't trading at .11 means there's a lot of uncertainty over whether the deal will go through.�
Sep 16, 2016 at 7:21 AM
phigment 52 week low hit today. Pretty high volume. Hopefully the bottom!�
Sep 16, 2016 at 10:00 AM
doggusfluffy According to the short thesis...this is merely the calm before the inevitable fall into bankruptcy due to institutional investor merger revolt...I guess.
From the Morning Energy:
�
Sep 16, 2016 at 10:53 AM
phigment Nevada Regulators Approve Agreement to Grandfather Solar Homes
Looks like it's approved. And that's likely what caused the spike in shares at 1:14 today.�
Sep 16, 2016 at 1:23 PM
drinkerofkoolaid I'd say that seems likely. A 7.2% swing today gives you an idea of what is possible. Also, notice all of the massive buying throughout the day. A lot of 200k-300k lots.�
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